CAPITALISM WILL EAT ITSELF

Unconstrained capitalism contains within itself its own inevitable destruction.

Despite the current emphasis on money markets, capitalism relies on two, far more basic, things for its continuation - production and consumption, and the greatest of these is consumption. Without real production and real consumption, the international money market is nothing more than a game of "Monopoly." Capitalism is only healthy when production and consumption are perfectly balanced.

Within the capitalist system, consumption is made possible by the making of a profit on production. This profit is shared between the bosses and the workers. However, as individual bosses tend to take a greater share of the profit than individual workers there is an inevitable movement of wealth into the bank accounts of the bosses. As efficiency leads to fewer and fewer bosses as companies are merged, fewer and fewer extremely rich people become the owners of most of the wealth of the world. It is this fact that has led to the situation in which western capitalism now finds itself - watching and enabling its own death throes.

It is not only efficiency in production that is necessary for the success of capitalism. Efficiency in consumption is equally necessary. The most efficient consumers are workers on slightly above average salaries. This is because the vast majority of their wealth has to be spent on real, constantly needed, commodities such as food, clothing, housing, the utilities and transport. The purchase of necessary products by workers is what powers capitalism.

The least efficient consumers are the extremely wealthy. They are simply unable to spend the vast majority of their individual wealth on necessary products so they either stockpile their wealth or spend it on "unreal" commodities such as obscenely expensive works of art. Such luxury products tend to require very few workers in their production and so the profits made on the purchase of such items are not passed on to many, if any, efficient consumers. Alternatively, the wealthy will gamble their wealth on the money markets which is no different to working people handing their wealth over to bookmakers or shoving it, coin by coin, into casino fruit machines.

Driven by the, almost unopposed, free market ideologies of Margaret Thatcher and U.S. right wingers, capitalism has now put most of the world's wealth into the ownership of a very few, extremely inefficient consumers. The increasing impoverishment of the world's workers has stalled consumption of production right at the heart of the engine of capitalism. Poverty, as has been shown over and over again, also leads to less production as workers have no incentive to be efficient in their production of goods. It is this inefficiency in both production and consumption that has led to the meltdown in the world's economy and the current recession which, I fear, is just the beginning of something much worse. We are living through a moment in time very similar to the fall of the Roman Empire and the outcome will be just as world changing.

The most infuriating thing about the collapse of most of the world's economy is that we are aware of the fact that unbridled capitalism is ultimately destructive and works contrary to the goals of capitalism. The wars and depressions of the 20th. Century were all, primarily, the result of inefficient distribution of the wealth created by the capitalist system. Furthermore, we were shown that controlled capitalism was the only way out of such wars and depressions. It was the imposition of "social capitalism" (my term for controlled capitalism that deliberately sets out to enrich workers so that they can consume efficiently and power the economy) that rescued the U.K. and Germany (amongst other countries) after WWII and, irony of ironies, the U.S.A. during the Roosevelt years. It was also what made Sweden the nation with one of the highest standards of living in history, in the second half of the century. Not only is this infuriating it is also emphasises the tragic element of the U.S. administrations recent decision to to try and save it's economy by enriching the already rich and impoverishing the workers of their country. In taking this road, the U.S.A. has signed its own death warrant as a world power and now faces a future of poverty and social anarchy. It will, of course, take the rest of the developed nations down with it. The only nation that will weather the economic storm of the next few years will be China. They will achieve this because they have studied the history of capitalism during the last hundred years or so and have deliberately embraced social capitalism, albeit a extremely nationalistic form of social capitalism (which is worrying).

Pray for your children and your children's children, as they are the ones that the greed of our rich and the stupidity of our poor have condemned to the new dark ages.

Comments

CAPITALISM WILL EAT ITSELF — 26 Comments

  1. A fantastically written piece. MP, you are back stronger than ever. I don’t think the distribution system under a Capitalism system was ever meant to allocate profit equally but, on the other hand, it didn’t factor greed in. In modern day Capitalism has become hijacked by the super rich and is associated with the excesses of wealth i.e Russians with big yachts, footballers with lots of bling. What we are seeing is, basically, a monopolisation of the Capitalist system that allows for private aggregation of vast wealth. This is not right.

  2. It is good to have you back and your commentary is even more perspicacious and pummeling than usual.

    The lesson which we in the west (and the U.S. particularly) need to learn is the simple fact that the best things in life aren’t things, so pursuit of ‘things’ is a dark and dead-end path.

  3. Nice analysis, clear presentation. Deserves a wider audience, imo. Thanks for this, MadPriest.

  4. Yes, and the recent decisions by the Federal reserve and the US government are right now stealing from the middle class and poor by keeping interest rates so low that those who carefully saved for retirement have no income from their retirement savings. In the US this year, you could have $1 million invested in savings certificates (CDs) or various money market accounts, and not be able to earn an income equal to the US poverty level of $14,800 for a couple. And this is to be the policy for at least the next two years. So, retired people who expected to be able to live off interest income will now have to consume their capital, and if not reversed soon, will use up their retirement funds before they die, thus becoming wards of the state. In addition, since 70% of the US economy is consumer spending, these now poor seniors cannot spend money on the baubles or even necessities that lead to hiring more workers, who then can buy their own stuff. So the cycle is a decreasing spiral unless some deus ex machina can get the economy going….. No one has any idea what that might be that could be passed in the US current political stalemate. Some bed we’ve made…..

  5. Well, and as corporations have gone global with no national connection, they are all looking to the next big consumer market – China…so as the middle class in America is left to crumble to dust and poverty without any real employment opportunities – even the service industry (i.e., Starbucks, McDonalds, et al) will dry up as disposable income disappears — the corporations could care less…so capitalism will eventually eat itself, but not for some time…the new consumers of Asia will take awhile to be spent.

  6. To an extent, yes, Renz. But the Chinese government is intent on managing capitalism and their history would indicate that they will be determined and successful in doing this. The multi-nationals are not used to such control.

  7. Laissez-faire capitalism never worked once it ran out of space to expand into; that’s why it had to be regulated and supported by governments. Remove the regulation, and you have chaos and collapse.

  8. Yes, Robert. The US government’s protection of capitalism is in fact anti-capitalist as it has stopped the market finding its own level.

  9. Yeh, this is just what I am afraid of. Here I am having just waked up from a dream of being homeless and living in the station wagon, with the dog. And realizing this is not so far off.

  10. Lots of poor old people eating their cats’ food.
    Rather like Mad Priest, really, come to think of it.

  11. I keep thinking of nobody’s-idea-of-a-Socialist, Henry Ford.

    He knew you had to *pay your workers enough to be able to afford the cars you made*.

    Today’s capitalists think, “Eh, if my worker HAS a job, s/he’ll be grateful for ANY pittance I give ’em!”

    ***

    If I were in the UK now, would I be helping myself to a flat-screen TV? No, I wouldn’t . . . but there would be a nagging voice telling me I’m a SUCKER for NOT so doing! Capitalism emphatically hasn’t worked for me…

  12. Of course, not, Adrain. I leave such things up to intellectual colossi such as yourself.

    By the way, I hope you weren’t too drenched by the recent inclement weather as you stood up there on that pedestal you have placed yourself upon.

  13. Oh, Jonathan, it made my old Catholic Socialist heart warm…a long, long time since I’ve heard such good words.

    But I do think it is too late for USA economics—we’ve gone over the hill, I’m afraid, and I expect it’s only a matter of time now before the corporations move their headquarters to Hong Kong or Singapore…and glad I’m 78 years old.

    Thank you, thank you, dear man, for these great words.

  14. Yes, John-Julian, with the political environment we have now, it is unlikely we will be able to solve the problems, since the far right does not understand how the real world works in economics. They are right in saying we have to control spending to a level we can afford, but they refuse to acknowledge that we must have additional revenue if we expect ever to pay off the deficits and national debt. At least if they can’t come up with a passable deficit-reduction plan by December, the resulting automatic cuts at least will include the preiously sacrosanct Defense Department and industry. I expect not nice things to happen here for a while. It’s an advantage to be 70 with inoperable prostate cancer, even if the hormone shots are keeping it at bay…

  15. Of course it will!

    I compare this laissez-faire capitalism to overeating. You can afford to stuff yourself, so you do, until the sheer excess of fat overloads the internal organs, and you die.

    The US is morbidly obese in more ways than one.

  16. Thank you JCF; I really don’t worry about it. My urologist has one patient who’s been on Lupron for 15 years and it’s still working. That would take me to 85, and I guess I have no complaints abut that. Of course my mother is 96 with no physical problems at all, but that’s life. I got some of the genes, just not all of them…..:-) I’m 70 and the same height I was at 25, no arthritis at all, good reflexes – so I plan to have fun and try to be useful while I’m around. I do magazine articles and am working on three books as we speak. Life is good.

  17. I have written elsewhere – we in the U.S. have ridden the wave of WWII economic boom to its final end…It can be argued it was pre-war production that pulled us out of the Depression and then for a couple of generations we had an explosion of wealth selling to the rest of the world as they rebuilt after all the destruction. We did such a good job of helping the defeated and preventing them from spending money on defense that Japan and Germany grew very strong as economic powers.

    However, as we let corporations take over the U.S. and buy our politicians etc., we have allowed our manufacturing base to disappear with all its decent jobs.

    We managed to keep the corpse alive longer than usual by allowing revolving credit to become very easily accessible to the middle class who dutifully wracked up significant debt. That debt was managed by frequent dipping into accumulated equity on our homes. The housing bubble of the 90’s was the last great hurrah.

    However, the housing industry has collapsed with no real recovery in sight. In fact, our dear “Democrat” President would like to see an end even to the mortgage interest tax credit, property tax credit, etc. – they’re nasty tax “loop holes” don’t you know. FannieMae and FreddieMac have been downgraded which will increase the cost of their loans…properties are still being foreclosed depressing neighborhood values, etc.

    No change in the housing market means no equity. No equity means no more paying down credit card debt. No paying down credit card debt alongside rising unemployment, no spending. No spending, no hope of any recovery.

    Essentially we are returning to the economy of the early 20th century. A time when home ownership was rare, folks rented rooms in boarding houses, had no insurance, died in charity hospitals, etc. etc. etc.