Robert Misik
The fact that western capitalism is in a severe crisis is now so
commonplace that it’s become almost a cliché. In 2008 the global
financial system stood on the brink of collapse and the rescue measures
undertaken by panic-stricken governments will burden their economies for
years to come.
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 Growth
Kaputtalismus (in German) will soon be published by aufbau Verlag.
(click cover for more info)
Reduced 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.
(for further reading please click
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