Flaws & Vulnerabilities Within Capitalisms
This project seeks to contribute strategic insight into the challenge posed by the interaction of capitalisms and global warmin, including its largely unanticipated impacts, and its lack of adequate, often frustrated, responses.
The project attempts to define a strategy to re-frame capitalisms from below, thus to devolve capitalisms, the reigning global political economic regime. (Yes, I deliberately refer to capitalisms in the plural, as I explain.)
Thus, I agree with Naomi Klein’s important book, This Changes Everything, meaning that climate change and capitalism cannot coexist for much longer — reckoned in decades, not centuries.
Moreover, capitalism as the dominant economic system contains contradictions, flaws, and vulnerabilities which must be spelled out to define a strategic response. To call for “us” to respond or rely on central governments, typically servile agents of capital, to “do something,” or to call, once again, for a “new paradigm” (whatever that might be) fails to recognize the damage and the urgency upon the human occupation of the Earth.
Capitalism has drawn some critical scrutiny lately, calls for a more inclusive form of capitalism that addresses global warming and inequality, and now exhibits notable generational loss of support. Capitalism’s resilience and dynamism will propel it forward, but keep your eyes on the horizon. The stakes could not be higher.
My approach here will be to present critical speculation as to how this drama might unfold to, say, 2050 — roughly a generation from now (May, 2019). The timeline derives from planetary warming. The blog will contain three components:
- Capitalism Breaking Down, the first part, will explain the flaws and vulnerabilites inherent in capitalism. I will concentrate on the hegemon now in decline, the USA. Other forms exist such as the EU and the rising superpower, China, pulling Asia with it. Since capitalism typically does not see the long term, climate change, its impacts, and its responses will be ignored in favor of what capitalism seeks: profit, typically in the short term.
- In part two, I offer a re-framing of the real economy, now under the spell of capitalism as a total world system. I intend to provide strategic responses based on the potential for devolution, inverting the hierarchical architecture of global capitalism. The exposed flaws, contradictions, and vulnerabilities discovered in part one will be addressed as widely-shared livelihood.
- Parallel blog posts that display relevant events, cases, and data from a variety of sources and perspectives — guarding against confirmation bias.
Capitalisms Breaking Down
Since the Great Recession of 2008-2009, confidence has been shaken in the stability and fairness of financial capitalism — where about 40% of the profits accrue. Economic crises spawned by financial bubbles no longer appear to be an accepted component of the notorious instability of the capitalist system, the business cycle. However, other grievances have piled up, such as burgeoning inequality and insecurity and the inability to acknowledge and to address carbon externalities (sort of concern with the environment — a misnomer that I will tackle later). So, I will break down these flaws and vulnerabilities (not all the cause of capitalism) into several categories that I will then explain more fully as this project proceeds. I have in mind the case of capitalism in the USA, but these dysfunctions are inherent in capitalisms.
- Slowing economic growth (stagnation) can be anticipated as the workforce participation in the economy shrinks and its productivity faces long-term decline. A compelling argument is made by Robert J. Gordon on this significant trend. Since WWII, a global regime dedicated to monetized material growth (mis-measured as GDP) has dominated policy worldwide. The rewards appeared broadly shared until the mid-1970s, but has skewed toward the ultra-rich since, with the concomitant grasp of political power. Eventually, profits and corporate capital investment will shrink as profit declines and as interest rates soar with climate disasters. The challenge here is to capture the system dynamics (Sternman) of capitalism under the duress impinging up to 2050. What goes up can go down, and probably will. We must study closely, starting with coverage of Robert J. Gordon’s seminal The Rise and Fall of American Economic Growth (2016).
- World population will level off, approaching zero population growth (ZPG) in the richer nations of the northern hemisphere (OECD in the jargon of the United Nations). Fewer workers will be available, and may not be needed as technology displaces labor. but that aggregate consumption may also level off — and revenues for firms. A demographic shift away from rural to urban areas will create challenges in cultural adjustment and investment in public health and services. Rural areas will be left behind and will resent their decreased status. However, since rural areas often possess disproportionate political clout, this resistance will prove formidable.
- Meanwhile, inequality within nations soars, excluding large portions of the citizenry from the gains of GDP and accumulation of wealth. Now, reactionary forces gather discontent, channeling resentmment toward such scapegoats as dispossessed refugees, the multitude of people seeking refuge as they travel from south to north — an ugly spectacle. However, lower GDP nations and regions expand monetized economic activity and population faster than mature economies, so a worldwide convergence of GDP per capita is underway (Pikkety). The resulting “ecology of rich and poor” has the potential to intensify environmental justice concerns as the planet heats up and equitorial regions become uninhabitable.
- As governments, especially in the capitalist north (as opposed to mixed economies elsewhere) practice the political expedience of deficit spending of the Keynesian model along with largely hidden expansions of military forces and imported arsenals. Such deficit spending creates national debt surges, especially since the low-interest rates since 2008. Inextricably, fiscal crises will propel austerity on deprived citizenry. Neglected roads, airports, bridges and other civil engineering infrastructure will fester and decay. The rich, gathering in armored enclaves, will separate from the Others, creating a need to suppress democracy and control restless populations. The rising interest rates and potential for inflation will not contribute to GDP growth or business invesment, thus gains in productivity.
- The political economy of cronyism has been baked into capitalism in the USA in particular and will resist change with ideology, force, propaganda, and the corruption of democracy. This enacts the business plan of the Medici family: “Money for power. Power for money.” While the propaganda of capitalism (Friedman) asserts that capitalism supports democracy, the opposite is true. The wholesale destruction of the public sphere has become a hallmark of the virulent neoliberal brand of capitalism, such as the dreaded Structural Adjustment Programs imposed on poor nations by the International Monetary Fund and the Starve the Beast budget ploy of the Republican Party.
- The side-effects of private profit-seeking decisions are imposed unwillingly upon others, misleadingly called “externalities,” a semantic trivialization of widespread social and environmental abuses — violations of Environmental Justice. Victims of such behavior are rarely compensated. The private sector embeds the reduction of costs of obtaining resources and the disposal of waste irresponsibly as part of the business plan of capitalism. Attempts to regulate such social costs will be stiffly resisted through the subterfuge of deregulation. The flip side of this is the hidden subsidies that powerful interests finagle from government — while simultaneously calling for less government.
- The horizon of capitalism, the range of perception, focuses on profit as its engine, its sine non qua. The short-term typically precludes long-term, comprehensive awareness and behavior. Furthermore, adherence to what Adam Smith dubbed the divine invisible hand (in Theory of Moral Sentiment, before The Wealth of Nations) relieves capitalisms of moral obligation (Friedman) since profit maximization (a.k.a., greed) guarantees the welfare of all, the theory of Pareto Optimality. (This atomistic theory deteriorates when social bonds connect “representative agents.”)
- Then along comes climate change, its largely unknown global and regional impacts (see precautionary principle), and the stiffening resistance to prevention thrown up by the ideology of denial backed by the Dark Money that benefits from what Naomi Klein dubs Disaster Capitalism. Demands for “armoring” cities and regions with dikes and walls will intensify as will calls for assistance with the damage of other “natural” disasters such as floods, tornadoes, fires, drought, crop losses, pest infestation, etc. Patronage will have another facet — witness Puerto Rico. In a fiscal crisis, such luxuries can only go to the Social Darwinists who, ironically, created the havoc. More control, more military, more repression can be applied, for a while. The seminal Stern Report anticipates a decline of 5% to 8% of global GDP to respond to lost productivity and the provision of social overhead capital.
- Geopolitics will resemble shifting tectonic plates. The USA will be hard hit, with the fuller realization that despite high, but stagnating and inequitable, per capita income, its medley of social indicators of well being will continue to lag: longevity, infant and maternal mortality, happiness, and environmental stress put the USA behind most industrialized countries and even behind some developing nations (see Costa Rica and Cuba). Meanwhile, rising superpower China shifts awkwardly to a consumer-based economy despite its mounting piles of debt. As the USA alienates its allies, China expands its influence through its Belt and Road colonization, along with the debt service and resource grabs it imposes on its client states. The EU stagnates. Southeast Asia, a mixed group, sees its denser and poorer nations (Bangladesh, Pakistan) deteriorate with climate damage. India, like China, a population and land mass giant, strains to control its internal ethnic, class, and regional disputes. Little cooperation on global warming or coordinated economic globalization can be anticipated.
The next projects will link each of these factors with a fuller treatment and to offer the strategic response, devolution — the point of this exercise. See my working notes for this page. Look at my supporting post that explains why I refer to plural types of capitalisms. Citations will soon be provided.