Capitalisms Breaking Down

This draft presents a proposal to devolve capitalisms — yes, plural. Part I lays out the problem as I see it. Part II, not yet posted, provides an alternative.

“There is no alternative [to Neo-Liberalism].”
Margaret Thatcher

“There is a crack, a crack in everything,
That’s how the light gets in.”
Leonard Cohen, Anthem

Capitalisms in the rich nations forcibly collide with the Earth’s climate, it’s carrying capacity, and it’s inhabitants. The impacts of climate change outrun the forecasts while the expectations for economic growth continue to falter: Exclusion and inequality, already unacceptable, will soar, debt intensifies into Fiscal Crisis, humanity’s material consumption will greatly exceed earth’s regenerative capacity, defensive “armoring” of infrastructure against climate-related threats will absorb surplus capital, and, propelled by the northward migration of dispossessed multitudes, militarism and reactionary nativist movements will break down needed geopolitical cooperation. I paint an ugly picture.

Profit, and only profit, drives capitalism. The presumed  beneficial side-effects of capitalism are measured only in the terms that capitalism itself has established: the market-basket of Gross Domestic Product, hence Gross World Product. Commodities, artifacts offered for sale, turn a profit that funds capital accumulation that over time concentrates wealth and power in the hands of those who own capital and control institutions. Recall the Medici family mantra: “Money for power. Power for money” (Machiavelli). Assume that capital seeks total control, including media myth-making.

Basic to my devolutionary strategy is to respond to the catalog of widely acknowledged flaws inherent within capitalisms. My case is that capitalism works for the few who own and profit by the political and organizational framework supportive to global capitalisms at its Neo-Liberal phase. Majorities are outside the flow of benefits but often in the path of its damage, including climate change, such as climate, environmental, and economic refugees. These unaccounted “externalities,” an ideological distraction, hide that these imposed costs lie within the business plans of corporations that likewise receive other subsidies from the subservient State that these corporations sponsor.

There are Alternatives

Another vision provides a clue as to how to subvert capitalism, rebuild from below. The seminal history of capitalism by Fernand Braudel distinguishes among, pointing to obvious responses:

  1. The foundation of material culture and livelihood must be nurtured. We will explore the potential latent before our eyes in households and proximate material culture and nature.
  2. Community-embedded commerce, government, and social capital — ironically the  original depiction by Adam Smith — lies before us. Simply expand and cultivate such resources, focus strong democracy on community needs, and expand commerce within our communities so as to support a local population. This is where what local and regional economic development belongs.
  3. The long-distance trade of large scale industry, a.k.a. economic globalization, must serve the foundation of households, communities, and bio-regions. We insist on corporate social responsibility, transparency, and business ethics. Profit must be merged with a more profound mission. 

The bolstering of local and regional forms of social and political capital around strong democracy provides an opportunity to rebuild political economic activity outside the dominant domain of capitalism. Neither eco-socialism nor Green New Deal offer a path defined by decentralization. Such flexible locally tailored solutions offer alternatives discovered in accessible social processes: polis, agora, local food cooperatives, clean available energy, collective water conservation, shared and cooperative labor arrangements, and so forth.

Leverage strong democracy from  the base and from embedded commerce beats economic globalization.  Aim at what Baumol et. al define as “good capitalism”: innovative, open, responsible. Metrics beyond GDP and other monetized indicators must reckon such real progress. We all have a role to play.

We must think outside simplified abstract conceptual terms of capitalism and economisms, such as an “obsolete market mentality” (Polanyi) and what hides from view, such as Dark Money (Mayer) and crony capitalism that infect our shredding democracy and enriches oligarchs.

BreakDown in Capitalisms

Capitalism exhibits vulnerabilities that threaten its performance and its legitimacy. The varieties of nationally established capitalisms will vary in this respect. However, the continuing rifts in the declining hegemonic USA will become especially acute, deserving close attention. Capitalisms’ institutional foundations will continue to diverge under stress from within and outside.

Please do not regard capitalism as either ahistorical or as a monolith: You forfeit an informed critical response. China, Nordic nations, Anglo-Americans, the EU, Japan, etc. each establish capitalism differently, representing different challenges from its citizenry, who have the standing and the intimate knowledge to challenge their distinct concerns. Reject ideologies that deaden thought.

But recognize that any instance of capitalism will be dynamic and in a state of disequilibrium (Shaikh). Recall Heraclitus, “You cannot step into the same river twice.”  As a citizen of the USA, I confront a particularly mercurial condition under the regime of president #45.

These vulnerabilities below will persist within a dystopic spiral. I consolidate here but will link to fuller explanations.

  1. Economic growth will continue to stagnate, especially in rich nations (since 1975 or so) as labor productivity stalls (Gordon, Baumol). Inflation-adjusted income per capita may exceed 2% in India, China, and other emerging capitalisms, but among the OECD nations, including the USA, will rarely exceed a moving average of 1.5%. See the January, 2019, IMF global GDP economic forecast for 2019 for a sample — few dare forecasts beyond a year or so. Then IMF lowered its forecast to lowest level since the Great Recession of 2009.
  2. Income and wealth inequalities will sharply diverge within nations but international average  incomes will converge (Pikkety, Saez). Meanwhile, the convenient market-oriented metric of GDP as an indicator of quality of life or standard of living will lose its historic authority. This trend, in place since the mid-1970s or so, is widely acknowledged. See Pikkety.
  3. Population growth will slow, even approaching ZPG in rich nations. Thus, economic growth will barely exceed population growth, rarely hitting 1.5%. Thus, fewer workers (with stagnant wages) and fewer consumers (with lower incomes) will retard the GDP growth trends exhibited since World War II — dubbed the Age of Acceleration in the Anthropocene literature.
  4. Inter-generational disparities will increase as fewer economically active young citizens must carry the larger proportion of needy and dependent elderly. The USA cannot contain its health costs nor improve its outcomes, stressing the federal budget. As consumption and expectations sag with stagnation, the young may rebel at this generational burden.
  5. The impacts of climate change will exceed forecasts in damage and speed. (See today’s newspaper.) Meanwhile, vested fossil-fuel interests and Dark Money will continue to obstruct efforts to prevent adequate responses.
  6. Defensive armoring of cities and other infrastructural responses will preclude private capital formation (thus productivity), dampen consumption (thus aggregate demand), exacerbate fiscal crises, but ultimately fail to protect regions from the ravages of climate change. The rich will escape to gated, heavily guarded enclaves. Picture to yourself the emerging (social) ecology of rich and poor (Athanasiou).
  7. Fiscal crises (O’Connor) will intensify, shrinking welfare state expenditures and needed social overhead capital. Authoritarian regimes founded on mass propaganda and fed by nativist movements will further corrupt democracies and thrive on violence.
  8. Interest rates will rise, consumption will decline, international cooperation will eviscerate trade agreements, all contributing to a decline of both GDP growth and corporate profit, reducing private investment and thus productivity and wages even further. The downward spiral will breakdown of the various national forms of capitalisms.
  9. Earth’s carrying capacity will overshoot and crash by 2040 or so. Famine and mass northward migration will create appalling tragedies. Reactionary nativist movements will support authoritarian regimes in service to Dark Money. Militarism will spike the arms trade. The chances for a managed decline to Overshoot have past. 

See the  conclusion to Part I: Capitalisms Breaking Down. Then, examine the transition to Part II: Inverting the Economy, involving degrowth and devolution.