Waiting for capitalism to end

Last week, I finished reading Wolfgang Streeck’s fascinating new book, How will capitalism end? Essays on a failing system, that was published last year and includes updated versions of several recent articles that had already been printed in various other hard-to-find sources. I had eagerly anticipated reading more of his work ever since I completed a laudatory blogpost back in 2015 after reading one of his previous books, Buying Time: The delayed crisis of democratic capitalism. It turns out that this new book is as good as I had anticipated for several different reasons, not the least of which being the inclusion of several polemical articles and comments about the various pitfalls into which many other authors have fallen when trying to analyze contemporary capitalism. His work is a model of rigour and clarity, with the result that it is much more convincing than anything that most other people have ever managed to write on the subject.

One of his main points is that the vast majority of professional economists are not the ones to be consulted whenever anyone wants to find out about capitalism. Those people always focus their analysis exclusively on the operations of “the market”, deliberately separating private capitalist investment from the rest of society, not to mention the natural world, as if whatever was happening outside the tiny sphere of big business had no bearing whatsoever on decisions being taken within that perfect little, closed environment. Which is why those pro-capitalist economists always refer to government “intervention” into the economy from the outside, or trade union “distortions” of reality, or other such “externalities”, including the natural environment, as if the rest of the universe had no legitimate bearing on “their” chosen subject.

Instead, Streeck argues that sociology from its inception should have adopted as its public mission the scientific analysis of contemporary capitalist society, and refused to follow American sociologist Talcott Parsons’ advice back in the 1950s to let the pseudo-science of economics exercise its blinkered hegemony over “its” subject. Simply because sociology is potentially so much better equipped to see capitalism for what it is, as part of a much larger analytical entity, the different elements of modern human society under capitalism as a whole interacting in an often destructive way, not only for most of the people within it, but also with the natural world that surrounds it.

In Streeck’s view, “the market” is, after all, just a ridiculously limited pseudonym to cover for the fact that private investors own all the tools that the vast majority of the people need in order to provide for their own livelihoods. Those owners will only allow other people access to those tools if they all agree to do so on terms set by those same owners, who insist that everyone else line up to guarantee them a maximum rate of increase on their capital.

In other words, even in countries calling themselves democracies, capitalist societies do not function in the original sense of entities being governed by the people as a whole. Though Streeck himself would not necessarily put it in this way, this means that all the deliberately deceptive words constantly being bandied about by the liberal theorists of democracy, such as freedom, human rights, “liberty, equality, fraternity”, and so on and so forth, do not really mean what most naive people think that they mean. None of those words should be seen as absolutes, but only as highly imperfect potentialities, to be granted by the owners of capital on a conditional basis to non-owners living in partly democratic republics or constitutional monarchies, as opposed to those living in absolute monarchies, totalitarian dictatorships or theocracies. But only if the much more numerous ordinary people living in the world’s theoretical democracies let a very small number of big capitalist investors “take their cut” (maximum profits) in advance of everyone else, regardless of whether or not there happens to be anything left over for the democratic majority.

In both the books that I read, Streeck refers back to the post-war “thirty glorious years” (1945-1975) of what he calls “democratic capitalism”, i. e., the only period during which modern capitalism succeeded quite well in maximizing its investments, while still managing to allow most ordinary people the opportunity to increase their overall standard of living. To be sure, this only took place in the small portion of the world’s countries that belonged to the Organization for Economic Cooperation and Development, meaning essentially the Western world and Japan. In many of those countries, the income gap between the social classes actually decreased overall during that period, instead of increasing as it had always done before then, and as it is once again increasing, in an even more dramatic way, since that time. Not to mention the fact that capitalism only became democratic during a period when most people still largely ignored any possible negative effects of all that glorious economic growth on the natural environment.

As Streeck explains it, towards the end of that blessed period, even in those privileged countries, the falling rate of profit led to Richard Nixon’s 1971 decision to abandon the fixed, postwar, monetary exchange rates that had prevailed since the Bretton Woods agreement of 1944. Thereby inaugurating what soon became an enormous inflation crisis, which had a much more devastating effect on profits than it did on wages and salaries. All early attempts at controlling that crisis failed until 1979, when the world’s most important central banks imposed monetarism, a four-fold increase in interest rates that eliminated inflation by plunging the world economy into a major recession.

That then led to the second major crisis, the debt crisis of the 1980s, when all the world’s capitalist governments, at all levels, were saddled with an enormous load of public debt, initially caused by monetarism, but exacerbated by short-term attempts at trying to save insolvent companies, farmers, homeowners, and so on, from imminent bankruptcy. Then came the third major crisis, that of private debt, the “financial industry” trying to preserve purchasing power for capitalist products by eliminating all previous limits on lending to what used to be known as “poor credit risks”. Both of those post-inflation strategies came to be known collectively as neoliberalism, replacing the Keynesian post-war strategy of limited government “intervention” into the economy with Hayekian theories of total reliance on “private enterprise”.

Neoliberalism also included the privatization of many previously nationalized companies, the adoption of a succession of free-trade deals leading to economic globalization, the deregulation of financial markets, the “financialization” of the world economy, a major increase in the ratio of speculative capital to productive capital, the implementation of massive tax evasion schemes and associated corruption of every possible kind, pro-capitalist government attacks on trade unions, dismantling of the welfare state through massive campaigns promoting government austerity, budgets balanced at the expense of everyone except private investors, and using all funds made available by stringent austerity programs to pay off as much public debt as humanly possible. In Europe, most of the former “Common Market” governments adopted a single currency, the euro, and used that monetary innovation to decouple economic policy even further from democracy, creating new, European-wide institutions deliberately cut off from any direct parliamentary influence.

In other words, the entire framework of “democratic capitalism”, such as it had existed during the “thirty glorious years”, was replaced by a strictly economic system of “governance”, run by the world’s leading private investors and an enormous bureaucracy of technocratic advisers. All the former communist dictatorships, and all the former socialist and social-democratic parties that had originally opposed capitalism, were all gradually absorbed into the globalized, capitalist world-system. Along with the drastically weakened trade unions that still continued to exist.

Then came the Great Recession of 2007-2009, initially caused by the lending of huge sums of money to new homeowners, in the USA and a number of other countries, who everyone in the financial business knew were totally incapable of repaying their mortgage debts. Which then mushroomed into even tighter neoliberal restrictions on what was left of democracy after all the other constraints so far mentioned. Although Streeck did not specifically explain it in this way, neoliberalism caused an enormous increase in the world-wide income gap between about one-ten-thousandth of the world’s population, possessing unprecedentedly high incomes, and the other 9999 ten-thousandths of that same population. As a result, the ultra-rich “masters of the universe”, or “crême de la crême”, now rule the roost, dominating even the slightly larger group of people who are merely well-off. Most of the world’s population, however, either remains very poor, or belongs instead to a flatlined “middle class” whose incomes stopped increasing about forty years ago.

Delocalization of more than half the world’s industrial jobs allowed millions of former peasants in many “Third World” countries like China to make a lot more money than they used to make, but their incomes after partial industrialization remain much lower than what such workers had been paid before that in the richer countries. With the result that the overall wage bill of the entire world’s industrial working-class, which now includes millions more people than it used to include, did not change all that much. In spite of the fact that delocalization significantly contributed to the enormous increase in the ultra-big business incomes mentioned earlier.

Which brings us to the central question of Streeck’s most recent book, how will capitalism end? In the first place, just in order to ask such a question, Streeck is obviously convinced that capitalism is on its last legs. Even though dozens of people have been predicting such a demise for decades, recent events do indeed indicate that private investment for profit does not seem to be doing well at all. Overall economic growth is at a world-wide stand-still, particularly in the countries dominated the most by private capitalism. Growth only continues to exist in such not yet completely privatized economies as China’s, although a large part of recent Chinese growth has been caused by huge over-investment in totally unproductive sectors, as well as in notoriously unreliable, official Chinese statistics.

Nevertheless, no alternative system is available to replace private capitalism, the state capitalism of totalitarian communism having failed as a self-sustaining alternative, and the other state-run capitalist enterprises in such places as Saudi Arabia also having run out of steam as well. Streeck himself emphasizes how very curious it is that at a time when private capitalism has no significant opposition to deal with any more, that it should nevertheless be suffering from a near-zero rate of profit gives credence to the idea that it is a victim of its own success. In other words, capitalism may have all along required the ongoing existence of at least some non-capitalist sources of plunder in order to survive.

Be that as it may, Streeck’s prognosis for the future is for a long interregnum, that is a sustained period in which the world’s most important private investors will simply let the world economy fall apart, for lack of a more profitable alternative. In which case, billions of people all over the world will have to try to survive, successfully in some cases, unsuccessfully in many others, at a time in which working conditions for those still employed, and living conditions for everyone, are simultaneously deteriorating all over the place. In fact, according to him, people have already started to deal with this already partly realized possibility, by adopting the four much-discussed strategies of “coping, hoping, doping and shopping”.

Coping simply means ordinary people trying desperately to keep everything afloat in their lives, by working very long hours for significantly less pay, and pushing themselves to the brink trying to do the increasingly difficult jobs for which they were originally hired. While simultaneously going all out to provide their children with the kinds of skills that what is left of the employment market still seems to require. Hoping means desperately clinging to traditional definitions of happiness, in spite of everything, avoiding resistance to power and “hoping against hope” that things will eventually go back to being “normal” at some point.

More or less in the way that a large section of the relatively impoverished middle class in the USA voted for a billionaire goof-ball like Donald Trump, offering a completely bogus “return to the promised land” of the previously industrialized USA by threatening the world’s largest corporations with an unending succession of Twitter attacks on anyone planning any further delocalization. Although Streeck’s work was published before the end of the recent US election campaign, he does refer to other such millenarian, right-wing populist projections in his book. Populism, however, is not an alternative to neoliberalism at all, but just another way of deliberately ignoring every problem, and inventing “alternative facts” to make everyone feel better.

Doping, of course, is another way of denying reality, by consuming huge quantities of alcohol, or tobacco, or various other drugs, most of them theoretically illegal. A truly enormous market whose only built-in limitation is the total elimination of such long-term consumers of capitalist products through death by overdose. The last of the four popular reactions is shopping, by which billions of consumers all over the world rack up astronomical ratios of personal debt to personal income through a “feeding frenzy”, which can only culminate in another crisis of universal bankruptcy.

So, going slightly beyond the limits of Streeck’s book, what kind of world could this interregnum turn out to be? The answer may lie in the possibility that one by one, all the world’s countries could follow the lead of the increasingly numerous “failed states”, such as Libya. In that country, six years after the Western-provoked collapse of the Gaddafi dictatorship, no credible government structure yet exists, and the entire country is divided into areas dominated by local warlords. In other words, the next social system destined to replace private capitalism in the whole world, will not be some kind of progressive step forward, toward one variety or another of world socialism, like many of us used to dream about in the past. Instead, the world will probably take a regressive step backward, toward something that has already existed in the past, namely feudalism.

At the moment, the only credible alternative to this projected, interregnum transition of undemocratic capitalism to the even more obviously undemocratic world of feudalism, seems to be the possibility that total war between all the competing warlords in every region may very well put an end to the human race altogether, thereby precluding the return to feudalism after all. What a fascinating choice of futures for all humankind! And all of it thanks to good, old-fashioned, free-enterprise capitalism.