Economists and analysts of a neo-conservative, economically liberal frame of mind have nothing to add to our understanding of this. Their models simply cannot explain why a system based on de-regulated market activities can ever get into crisis – and why it cannot rediscover the path to prosperity if the state is gradually dismantled and market forces let loose.
But economists and analysts tuned to Keynesian and reformist thinking are much closer to reality: their criticism amounts to saying that the wrong kind of policies – deregulation of markets, liberalisation of the financial system, shrinking the state and the scandalous growth in inequality – had already undermined the system’s stability. In a word: the wrong policies have been pursued for 30 years and a disastrous set of policies has been enacted since the outbreak of the crisis but the system can only be stabilized once the right policies are in place.
But let’s take a closer look at the world: Here’s Spain, with its ghost houses, monuments to a failed fresh start, stretching all along the beaches for kilometer after kilometer; or let’s cast a glance at the ‘solidarity’ clinics in Greece over-crowded by people with no health insurance; at rural America, where the jobless numbers refuse to go down despite growth on tick; at our inner cities in northern Europe where everything seems to be stable but we very quickly get to feel that things are not really progressing, it’s at best stagnation with ever-harsher competition for decent living standards and, along with that, rampant resentment without any confidence in the future. Briefly put: it ain’t working properly any more. So the question is: what if Keynesian tools don’t do the trick anymore?
The American economist Robert Brenner noted such a development as long as 20 years ago in his book The Economics of Global Turbulence – and forecast a crisis-ridden future. It was Brenner who coined the concept of “secular stagnation”: a phrase now spoken aloud by all mainstream economists.
The charm of Brenner’s analysis lies in that it explains the end of the post-war boom and the start of the slow decline through endogenous tendencies or the logical in-built dynamics of capitalism. And thus the conclusion follows: Even if they’re only crudely true then these critical tendencies cannot simply be wished away through a different set of policies because developed capitalism, for technological as well as economic reasons, is hitting limits that no longer allow for high rates of growth and productivity increases.
Because the profit margins of average firms are declining, business organisations, helped by friendly governments, began attacks on workers’ rights and the welfare state, thereby reducing the incomes of normal people but failing to solve the problem – as this depressed consumer demand again. Each answer to the crisis heightens it anew.
In such a situation it’s completely obvious that there will be a bubble on financial markets and financial institutions will become the determinant players of global capitalism. But bloated financial markets once again bring into play those intrinsic instabilities that top economists such as Hyman Minsky have analysed. The more reckless the gambling on the markets the more the entire system balances on a knife edge.
Why Capitalism Needs GrowthReduced growth is, for various reasons, a systemic problem. To understand this we must examine a decisive factor in capitalism. What made it so successful and prosperous was investment credit. In other words, it needs debt. Firms take out credit, run up debt in order to invest but these investments only pay back if there’s adequate growth; if not, there’s a wave of bankruptcy.
If we look back soberly on the last 20 years then we have to acknowledge there was a huge explosion of credit but only relatively low economic growth. If the general economic lesson to be drawn from such a credit explosion were that a gigantic amount of growth would ensue – it might remark critically that this growth would be unsustainable, would be diverted into the wrong channels, capital would not be allocated to the right places but it would smartly assume that a credit expansion on this scale would generate huge growth. But this didn’t happen. We have credit expansion and mini growth – and not just overnight.
One of the least observed but, possibly, most significant crisis symptoms is the general degree of indebtedness in capitalist economies. What we mean by this is the accumulated debt of all economic actors in an economy, not just the state: government, corporate and private household debt taken together. Most economies have gearing of 300% of GDP. Often 400%. A few decades ago the level was still only a quarter of this. How is one supposed to bring this level down if there’s low growth, how are the resultant repayments supposed to be financed?
The End Of Capitalism?Can one therefore imagine that capitalism is a caputalism bearing the Cain’s mark of collapse? And how can we envisage this end?
“The image I have of the end of capitalism — an end that I believe is already under way — is one of a social system in chronic disrepair” is how the German social scientist Wolfgang Streeck put it two years ago. A permanent quasi-stagnation with at best mini-growth rates, explosive inequality, privatization of all and sundry, endemic corruption and plunder, where normal profit expectations get ever lower, a consequent moral collapse (capitalism is more and more linked to fraud, theft and dirty tricks), the West getting weaker and weaker, staggering along as it foments disintegration and crisis in trouble spots on its periphery.
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