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| Scheidel could only express despair: “Thousands of years of history boil down to a simple truth,” he wrote. 'Ever since the dawn of civilisation, ongoing advances in economic capacity and state-building favoured growing inequality but did little if anything to bring it under control.' He implied that inequality in the economic sphere would produce, other things being equal, a political advantage that only perpetuated the position of the elite by means of taxes, business regulations and labour laws. Inequality, in other words, led to oligarchy, which in turn reproduced and exacerbated inequality. | Scheidel could only express despair: “Thousands of years of history boil down to a simple truth,” he wrote. 'Ever since the dawn of civilisation, ongoing advances in economic capacity and state-building favoured growing inequality but did little if anything to bring it under control.' He implied that inequality in the economic sphere would produce, other things being equal, a political advantage that only perpetuated the position of the elite by means of taxes, business regulations and labour laws. Inequality, in other words, led to oligarchy, which in turn reproduced and exacerbated inequality. | ||
| - | //Excerpted and paraphrased by Fred from **Scott_Inequality-Violence.docx** - 11/5/17// | + | (Excerpted and paraphrased by Fred from **Scott_Inequality-Violence.docx** - 11/5/17) |
| - | RG-Capitalism’s Terminal Crisis | + | ==== Capitalism’s Terminal Crisis ==== |
| + | |||
| + | (by RG) | ||
| + | |||
| + | Summary: 1. The Crash of 2008 -- 2. Obama and the Jobless ‘Recovery’ of 2010 -- 3. Blowing New Bubbles -- 4. The Great Recession -- 5. Could Capitalism Have Reformed? -- 6. So Marx Was Wrong? -- 7. Overproduction and the Decline in the Rate of Profit -- 8. Historical and Geographical Limits to Capitalist Growth -- 9. Why Hadn’t Capitalism, with its Alleged ‘Contradictions’ Already Collapsed? -- 10. Military Keynesianism -- 11. The Devil in the Zeros -- 12. Advertising -- 13. Death on the Installment Plan -- 14. Capitalism’s ‘Final’ Crisis? -- 15. What Next? | ||
| Looking back over history, young people raised in today's egalitarian societies where no one starves, no one is enslaved, no one dies of preventable diseases, no one lives haunted by the fear of destitution in case of illness or unemployment, and no super-rich oligarchs dominate the world's resources, often wonder in amazement that people in the past put up with such obvious injustices for so long. | Looking back over history, young people raised in today's egalitarian societies where no one starves, no one is enslaved, no one dies of preventable diseases, no one lives haunted by the fear of destitution in case of illness or unemployment, and no super-rich oligarchs dominate the world's resources, often wonder in amazement that people in the past put up with such obvious injustices for so long. | ||
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| World capitalism's ideological hegemony was of course maintained by a constant barrage of propaganda, that is to say advertising and public relations, not just for particular competing brands, but for consumerism as a way of life and ultimately for the system itself. This to the exclusion of any serious discussion of alternate systems in the media and public discourse, whether enforced by censorship or cooptation. But even pervasive propaganda with the underlying threat of repression cannot preserve the political and social //legitimacy// on which the survival of a regime or system depends. This was proven when the so-called "Communist" system in Russia and East Europe, with its extensive propaganda and police-state security apparatus, collapsed like a house of cards in 1989. | World capitalism's ideological hegemony was of course maintained by a constant barrage of propaganda, that is to say advertising and public relations, not just for particular competing brands, but for consumerism as a way of life and ultimately for the system itself. This to the exclusion of any serious discussion of alternate systems in the media and public discourse, whether enforced by censorship or cooptation. But even pervasive propaganda with the underlying threat of repression cannot preserve the political and social //legitimacy// on which the survival of a regime or system depends. This was proven when the so-called "Communist" system in Russia and East Europe, with its extensive propaganda and police-state security apparatus, collapsed like a house of cards in 1989. | ||
| - | According to 20th century world-systems theorist Immanuel Wallerstein, ultimately a system's legitimacy depends on its ability to convince the population of "those who seem to be doing poorly in the short run that they will do better, even much better, in some longer run, precisely because of the structure of the system, and that consequently they should support the continue functioning of the system and its decision-making process." (//Utopistics//, 1998). Thus the myth that the workers in Russia and East Europe were "building socialism" and moving towards a new society of peace and plenty provided legitimacy for the "Communist" system – until it was no longer credible, and the system collapsed. Thus the "Horatio Alger" myth that any industrious person | + | According to 20th century world-systems theorist Immanuel Wallerstein, ultimately a system's legitimacy depends on its ability to convince the population of "those who seem to be doing poorly in the short run that they will do better, even much better, in some longer run, precisely because of the structure of the system, and that consequently they should support the continue functioning of the system and its decision-making process." (//Utopistics//, 1998). Thus the myth that the workers in Russia and East Europe were "building socialism" and moving towards a new society of peace and plenty provided legitimacy for the "Communist" system – until it was no longer credible, and the system collapsed. Thus the "Horatio Alger" myth that any industrious person could become a millionaire captain of industry like Andrew Carnegie or Bill Gates continued to blind the masses of wage-earners to the increasingly severe inequality under capitalism until they were no longer able to keep such hopes alive, and the system lost its legitimacy. |
| + | The second reason for capitalism's 500-plus years of hegemony as the dominant world-system, despite periodic economic crises that plagued it from the beginning was it capacity for adaptation to new circumstance and above all to the fact that it still had new world's to conquer and pillage, so that fresh wealth kept pouring into the system from ever new corners of the planet in the form of basic materials like gold or petroleum, new reservoirs of cheap labor, and new market into which it could dump its ever-increasing over-production of goods. With the advent of full globalization at the end of the 20th century and the rise of previously under-developed China as the main industrial rival to the long-dominant United States, at the beginning of the 21st, this era of constant capitalist expansion came to an end, and capitalism's inner contradictions, long latent, rose to the surface and provoked the first truly world-wide financial crash and global depression, from which it was unable to recover. | ||
| - | Summary: 1. The Crash of 2008 -- 2. Obama and the Jobless ‘Recovery’ of 2010 -- 3. Blowing New Bubbles -- 4. The Great Recession -- 5. Could Capitalism Have Reformed? -- 6. So Marx Was Wrong? -- 7. Overproduction and the Decline in the Rate of Profit -- 8. Historical and Geographical Limits to Capitalist Growth -- 9. Why Hadn’t Capitalism, with its Alleged ‘Contradictions’ Already Collapsed? -- 10. Military Keynesianism -- 11. The Devil in the Zeros -- 12. Advertising -- 13. Death on the Installment Plan -- 14. Capitalism’s ‘Final’ Crisis? -- 15. What Next? | + | This historical process was long invisible to contemporary observers, both among investors, who increasingly depended on financial bubbles to increase their share of the world's wealth, and among most Marxists, who failed to understand the abstract, long-term nature of Marx's analysis of capital and gave up waiting for what they imagined would be its imminent collapse. Since this process was complicated, let us look at it in detail... |
| - | + | ||
| According to the neo-liberal, free-market orthodoxy of the early 21th century, a crisis like the Crash of 2008 was theoretically impossible because capitalism had achieved equilibrium of un-ending growth. Erased from official memory were the financial shocks of 2001 (the dot-com bubble), 1994 (the Mexican debt crisis), 1989 (the Savings & Loan crisis), 1987 (the Black Monday stock market crash), 1973-74 (the oil crisis and stock market crash) and the Crash of 1929 (ancient history, irrelevant). Small wonder no one – outside of a handful of old-fashioned classical Marxists – saw the Crash of 2008 coming. | According to the neo-liberal, free-market orthodoxy of the early 21th century, a crisis like the Crash of 2008 was theoretically impossible because capitalism had achieved equilibrium of un-ending growth. Erased from official memory were the financial shocks of 2001 (the dot-com bubble), 1994 (the Mexican debt crisis), 1989 (the Savings & Loan crisis), 1987 (the Black Monday stock market crash), 1973-74 (the oil crisis and stock market crash) and the Crash of 1929 (ancient history, irrelevant). Small wonder no one – outside of a handful of old-fashioned classical Marxists – saw the Crash of 2008 coming. | ||
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| Yet ‘the only truly surprising thing about the 2008 financial meltdown is how easily the idea was accepted that its happening was unpredictable,’ remarked Slovenean philosopher Slovoj Zizek, who contended that although anti-capitalist, anti-IMF globalization protesters had been denouncing the banks and warning of an impending crash for over a decade, only to be met by ridicule, tear-gas and mass arrests, in the last analysis ‘the police were used to literally stifle the truth,’ | Yet ‘the only truly surprising thing about the 2008 financial meltdown is how easily the idea was accepted that its happening was unpredictable,’ remarked Slovenean philosopher Slovoj Zizek, who contended that although anti-capitalist, anti-IMF globalization protesters had been denouncing the banks and warning of an impending crash for over a decade, only to be met by ridicule, tear-gas and mass arrests, in the last analysis ‘the police were used to literally stifle the truth,’ | ||
| - | 1. The Crash of 2008 | + | === 1. The Crash of 2008 === |
| Indeed, during the 2008 crash, global capitalism’s entire financial edifice appeared to be collapsing into a bottomless pit of self-destruction – although this only happened decades later. The bursting of the housing bubble in 2007 had already exposed the financial markets as a vast pyramid scheme built on a foundation of leveraged debt and fictitious capital. Within months, credit evaporated and trillions of dollars in securities began melting down. By October 2008, prominent financiers, economists and statesmen in the U.S. and Europe were using expressions like ‘an economic Pearl Harbor’ (financier Warren Buffet), ‘the edge of the abyss’ (economist Paul Krugman), ‘an approaching tsunami’ (Jacques Attali, former President of the European Bank for Reconstruction and Development), and a ‘financial September 11’ (Laurence Parisot, head of the French business association). That month Alan Greenspan, the revered neo-liberal guru who ran the Federal Reserve Bank for 18 years, was hauled before Congress and forced to confess that had been “mistaken” in his faith in self-regulating free markets and “wrong” to have encouraged the housing and financial bubbles by lowering the interest rates and lending billions of freshly-printed U.S. dollars to the big banks. According to The New Yorker Wall Street traders were talking about “nuclear winter” in the credit markets: “nothing moves or grows.” So great was the shock of the Crash of 2008 that TV pundits openly began questioning the system, and Newsweek famously headlined ‘We Are All Socialists.’ | Indeed, during the 2008 crash, global capitalism’s entire financial edifice appeared to be collapsing into a bottomless pit of self-destruction – although this only happened decades later. The bursting of the housing bubble in 2007 had already exposed the financial markets as a vast pyramid scheme built on a foundation of leveraged debt and fictitious capital. Within months, credit evaporated and trillions of dollars in securities began melting down. By October 2008, prominent financiers, economists and statesmen in the U.S. and Europe were using expressions like ‘an economic Pearl Harbor’ (financier Warren Buffet), ‘the edge of the abyss’ (economist Paul Krugman), ‘an approaching tsunami’ (Jacques Attali, former President of the European Bank for Reconstruction and Development), and a ‘financial September 11’ (Laurence Parisot, head of the French business association). That month Alan Greenspan, the revered neo-liberal guru who ran the Federal Reserve Bank for 18 years, was hauled before Congress and forced to confess that had been “mistaken” in his faith in self-regulating free markets and “wrong” to have encouraged the housing and financial bubbles by lowering the interest rates and lending billions of freshly-printed U.S. dollars to the big banks. According to The New Yorker Wall Street traders were talking about “nuclear winter” in the credit markets: “nothing moves or grows.” So great was the shock of the Crash of 2008 that TV pundits openly began questioning the system, and Newsweek famously headlined ‘We Are All Socialists.’ | ||
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| Yet even despite this humongous infusion of taxpayer cash, by March 2009 the DOW industrial average had declined to half its October 2007 value. Standard and Poor’s Index, adjusted for inflation, was down about 50% for the 10-year period from Feb. 17, 1999 to Feb. 17, 2009 -- matching the worst 10 years of the Depression -- and the prestigious OECD (Organization for Economic Co-operation and Development) was referring to the economic crisis as ‘the worst in human memory.’ Eventually, massive transfusions of cash revived the swooning financial sector. Securities began to rise again and ‘recovery’ was officially declared. And soon all was forgotten. Until it happened again, only on a vastly greater scale. | Yet even despite this humongous infusion of taxpayer cash, by March 2009 the DOW industrial average had declined to half its October 2007 value. Standard and Poor’s Index, adjusted for inflation, was down about 50% for the 10-year period from Feb. 17, 1999 to Feb. 17, 2009 -- matching the worst 10 years of the Depression -- and the prestigious OECD (Organization for Economic Co-operation and Development) was referring to the economic crisis as ‘the worst in human memory.’ Eventually, massive transfusions of cash revived the swooning financial sector. Securities began to rise again and ‘recovery’ was officially declared. And soon all was forgotten. Until it happened again, only on a vastly greater scale. | ||
| - | 2. Obama and the Jobless ‘Recovery’ of 2010 | + | === 2. Obama and the Jobless ‘Recovery’ of 2010 === |
| Bailing out the billionaires temporarily saved the economy In 2008, Wall Street’s representatives basically took over the White House and used the power of the government and re-inflated the financial balloon at taxpayer expense -- without even patching up the holes caused by deregulation. As a result, Goldman-Sachs, Smith-Barney and the other investment banks were able to resume paying their traders million-dollar bonuses, and ‘recovery’ was declared. ‘Jobless recovery’ to be sure. How long could this new bubble last? If the immediate cause of the 2008 financial melt-down was speculation based on excessive borrowing, it was hard to see how borrowing even more money could do more than compound the problem by pushing it into the future. Indeed, new balloons soon began looming on the horizon, among them precious metals, sovereign debt, emerging markets and a newly-created market for trading permits to keep pumping carbon into the atmosphere. | Bailing out the billionaires temporarily saved the economy In 2008, Wall Street’s representatives basically took over the White House and used the power of the government and re-inflated the financial balloon at taxpayer expense -- without even patching up the holes caused by deregulation. As a result, Goldman-Sachs, Smith-Barney and the other investment banks were able to resume paying their traders million-dollar bonuses, and ‘recovery’ was declared. ‘Jobless recovery’ to be sure. How long could this new bubble last? If the immediate cause of the 2008 financial melt-down was speculation based on excessive borrowing, it was hard to see how borrowing even more money could do more than compound the problem by pushing it into the future. Indeed, new balloons soon began looming on the horizon, among them precious metals, sovereign debt, emerging markets and a newly-created market for trading permits to keep pumping carbon into the atmosphere. | ||
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| However, Obama showed his hand immediately after his overwhelming popular victory at the polls by choosing to reassure his Wall Street backers rather than his electorate. The then President-elect declared there could be ‘only one president’ and wove what he called a ‘seamless transition’ during which he acquiesced to more BBB’s and nominated staunch friends of Wall Street to run the economy, including the two men most responsible for the Crash of 2008: Larry Summers (whose great achievement was passing the law that deregulated derivatives, these risky securities that led to the downfall of AIG, costing $180 billion) and Tim Geithner (who as head of the New York Federal Reserve Board failed to oversee New York’s banks). ‘He who pays the piper calls the tune.’ You can’t say that Mr. Obama – whose primary campaign had received more Wall Street money than Hilary Clinton’s and whose election war chest far surpassed McCain’s – wasn’t loyal to his campaign contributors. | However, Obama showed his hand immediately after his overwhelming popular victory at the polls by choosing to reassure his Wall Street backers rather than his electorate. The then President-elect declared there could be ‘only one president’ and wove what he called a ‘seamless transition’ during which he acquiesced to more BBB’s and nominated staunch friends of Wall Street to run the economy, including the two men most responsible for the Crash of 2008: Larry Summers (whose great achievement was passing the law that deregulated derivatives, these risky securities that led to the downfall of AIG, costing $180 billion) and Tim Geithner (who as head of the New York Federal Reserve Board failed to oversee New York’s banks). ‘He who pays the piper calls the tune.’ You can’t say that Mr. Obama – whose primary campaign had received more Wall Street money than Hilary Clinton’s and whose election war chest far surpassed McCain’s – wasn’t loyal to his campaign contributors. | ||
| - | 3. Blowing New Bubbles | + | === 3. Blowing New Bubbles === |
| Thus the banks and brokerage houses, still unregulated, were re-inflated with tax-payer money, and securities prices rose from the dead, like a latter-day Lazarus galvanized by an injection of capital liquidity. What did the banks do with all the public’s hard-earned billions? One thing for certain: they didn’t reinvested it in the working economy. In order to stimulate investment, the Fed began lending money to the banks at record low rates around 1%, but ordinary people found it impossible to get a small business loan! ‘Cheap Debt for Corporations Fails to Spur Economy’ was the lead in the Times Business Section on Oct. 9, 2010. Apparently, most of those freshly-printed billions the Fed turned over to the banks and brokerage houses went into to speculation, much of it overseas. January 2010 saw the rise of new speculative ‘bubbles’ in Chinese real estate and commodities like pork and copper (whose price went from $2,800 a ton in Dec. 2008 to $7,500 on Jan. 21, 2010). And according to an October 14, 2010 N.Y. Times Editorial entitled ‘The Next Bubble,’ emerging economies like Brazil are next on the speculators’ hit-and-run list with potentially highly-disruptive results. | Thus the banks and brokerage houses, still unregulated, were re-inflated with tax-payer money, and securities prices rose from the dead, like a latter-day Lazarus galvanized by an injection of capital liquidity. What did the banks do with all the public’s hard-earned billions? One thing for certain: they didn’t reinvested it in the working economy. In order to stimulate investment, the Fed began lending money to the banks at record low rates around 1%, but ordinary people found it impossible to get a small business loan! ‘Cheap Debt for Corporations Fails to Spur Economy’ was the lead in the Times Business Section on Oct. 9, 2010. Apparently, most of those freshly-printed billions the Fed turned over to the banks and brokerage houses went into to speculation, much of it overseas. January 2010 saw the rise of new speculative ‘bubbles’ in Chinese real estate and commodities like pork and copper (whose price went from $2,800 a ton in Dec. 2008 to $7,500 on Jan. 21, 2010). And according to an October 14, 2010 N.Y. Times Editorial entitled ‘The Next Bubble,’ emerging economies like Brazil are next on the speculators’ hit-and-run list with potentially highly-disruptive results. | ||
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| A particularly sinister innovation in the re-inflated financial markets came in March 2010 with the news that the newest target of speculative capital was the outstanding debt of the weaker European economies, like Greece, Portugal and Spain. Apparently big investment banks like Goldman Sachs were betting against the price of the sovereign debt of these countries, thus undermining confidence in their ability to pay. Remember that if buying copper futures can actually create an upward trend, so attacking a foreign currency or sovereign debt can undermine that nation’s credit, accelerating a downward trend. The targets of these ghoulish speculators are the nations hit hardest by the recession, those who naturally have the highest debt to income ratio. Mediterranean countries like Greece were already suffering poverty and high unemployment. Default provoked by speculative attacks developed into a social catastrophe: the bankrupting of all the social services that made life possible for poor and working class people. For under capitalism, the poor naturally bore the burden of the financial irresponsibility of the rich. The cream of the jest was that at in 2007 Goldman Sachs (among others) were selling great bundles subprime-tainted mortgage-backed securities to these very countries (while secretly betting against their own mortgage-backs on the re-insurance market as a hedge!) | A particularly sinister innovation in the re-inflated financial markets came in March 2010 with the news that the newest target of speculative capital was the outstanding debt of the weaker European economies, like Greece, Portugal and Spain. Apparently big investment banks like Goldman Sachs were betting against the price of the sovereign debt of these countries, thus undermining confidence in their ability to pay. Remember that if buying copper futures can actually create an upward trend, so attacking a foreign currency or sovereign debt can undermine that nation’s credit, accelerating a downward trend. The targets of these ghoulish speculators are the nations hit hardest by the recession, those who naturally have the highest debt to income ratio. Mediterranean countries like Greece were already suffering poverty and high unemployment. Default provoked by speculative attacks developed into a social catastrophe: the bankrupting of all the social services that made life possible for poor and working class people. For under capitalism, the poor naturally bore the burden of the financial irresponsibility of the rich. The cream of the jest was that at in 2007 Goldman Sachs (among others) were selling great bundles subprime-tainted mortgage-backed securities to these very countries (while secretly betting against their own mortgage-backs on the re-insurance market as a hedge!) | ||
| - | 4. The Great Recession | + | === 4. The Great Recession === |
| Meanwhile, as the markets revived and speculative profits again began to sore, with markets hitting new highs, the Great Recession continued to paralyze the economy, which kept shedding jobs while bankers remained shy of lending to businesses that want to make productive investments. And so un-working capital piled up in the banks, inflating ever new bubbles which keep expanding until they inevitably popped. Capitalism’s non-viability was already evident when it emerged that betting on the bankruptcy of Greece -- the cradle of Western Civilization -- was the best use the bankers couls find for their capital. And so the unforeseen and too-soon-forgotten Great Crash of 2008 left in its wake a twilight spectacle of ghoulish speculative capital destroying whole economies so as to feast on their corpses. | Meanwhile, as the markets revived and speculative profits again began to sore, with markets hitting new highs, the Great Recession continued to paralyze the economy, which kept shedding jobs while bankers remained shy of lending to businesses that want to make productive investments. And so un-working capital piled up in the banks, inflating ever new bubbles which keep expanding until they inevitably popped. Capitalism’s non-viability was already evident when it emerged that betting on the bankruptcy of Greece -- the cradle of Western Civilization -- was the best use the bankers couls find for their capital. And so the unforeseen and too-soon-forgotten Great Crash of 2008 left in its wake a twilight spectacle of ghoulish speculative capital destroying whole economies so as to feast on their corpses. | ||
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| Hunger such as the U.S. had not known since the ‘30s became widespread. Charitable food pantries were overwhelmed, and one American in seven was dependant on food stamps. Let us note that to qualify for food stamps your income had to fall below the official ‘poverty threshold’ of about $11, 000 (or $210 a week) if you are single. A couple had fall below $14, 000 (or $270 a week -- the government apparently figured that ‘two can live as cheaply as one’) and a family of four had fall under $22, 000 ($423 a week) to qualify for food assistance. With rents skyrocketing and millions of homes foreclosed, there was no way people at that level of income could pay for housing and food. (Indeed, the government’s method of calculating the official poverty threshold was changed to reflect only on the price of food, having been ‘reformed’ to exclude housing.) Small wonder that millions, including full-time minimum wage workers, experienced homelessness and that countless more are jammed in with relatives or living four to a room like the slum-dwellers of the 19th and early 20th Centuries. A whole blighted generation of young men and women (the hardest hit by the new poverty) now lacked the privacy to experience normal sexual relationships, and their lives continued to get worse, not better, since historically poverty tends to linger even after employment revives. | Hunger such as the U.S. had not known since the ‘30s became widespread. Charitable food pantries were overwhelmed, and one American in seven was dependant on food stamps. Let us note that to qualify for food stamps your income had to fall below the official ‘poverty threshold’ of about $11, 000 (or $210 a week) if you are single. A couple had fall below $14, 000 (or $270 a week -- the government apparently figured that ‘two can live as cheaply as one’) and a family of four had fall under $22, 000 ($423 a week) to qualify for food assistance. With rents skyrocketing and millions of homes foreclosed, there was no way people at that level of income could pay for housing and food. (Indeed, the government’s method of calculating the official poverty threshold was changed to reflect only on the price of food, having been ‘reformed’ to exclude housing.) Small wonder that millions, including full-time minimum wage workers, experienced homelessness and that countless more are jammed in with relatives or living four to a room like the slum-dwellers of the 19th and early 20th Centuries. A whole blighted generation of young men and women (the hardest hit by the new poverty) now lacked the privacy to experience normal sexual relationships, and their lives continued to get worse, not better, since historically poverty tends to linger even after employment revives. | ||
| These young Americans are experienced what a generation of Japanese had been living through since the late 1980s and early ‘90s when the Tokyo stock market and real estate bubbles crashed and Japan fell into a slow but relentless decline that neither enormous budget deficits nor a flood of easy money could reverse. As the N.Y. Times noted in 2010, ‘For nearly a generation now, the (Japanese) nation has been trapped in low growth and a corrosive downward spiral of prices, known as deflation, in the process shriveling from an economic Godzilla to little more than an afterthought in the global economy. Now, as the United States and other Western nations struggle to recover from a debt and property bubble of their own, a growing number of economists are pointing to Japan as a dark vision of the future.’ | These young Americans are experienced what a generation of Japanese had been living through since the late 1980s and early ‘90s when the Tokyo stock market and real estate bubbles crashed and Japan fell into a slow but relentless decline that neither enormous budget deficits nor a flood of easy money could reverse. As the N.Y. Times noted in 2010, ‘For nearly a generation now, the (Japanese) nation has been trapped in low growth and a corrosive downward spiral of prices, known as deflation, in the process shriveling from an economic Godzilla to little more than an afterthought in the global economy. Now, as the United States and other Western nations struggle to recover from a debt and property bubble of their own, a growing number of economists are pointing to Japan as a dark vision of the future.’ | ||
| - | 5. Could Capitalism Have Reformed? | + | |
| + | === 5. Could Capitalism Have Reformed? === | ||
| Instead of putting regulatory patches on the re-inflated speculative balloon, the Obama Administration, turned over its finances to the gentlemen from Goldman Sachs, who showed little interest in regulating bankers, traders and insurance companies (or for that matter energy, drug or arms companies). Nonetheless, re-regulation and a watered-down version of New Deal Keynesian deficit spending remained the remedies favored by serious economists like Josept Stieglitz and Paul Krugman as well as by the unions and by many self-designated Marxists and socialists. They all seemed to believe in ‘state intervention’ as an effective remedy to capitalism’s current crisis. This reformist Left forgot, in its yearning for a solution, that neo-Keynesian state-intervention, designed to save capitalism during the Depression of the 1930’s, arguably didn’t actually succeed, since it took war production to actually end the Depression. | Instead of putting regulatory patches on the re-inflated speculative balloon, the Obama Administration, turned over its finances to the gentlemen from Goldman Sachs, who showed little interest in regulating bankers, traders and insurance companies (or for that matter energy, drug or arms companies). Nonetheless, re-regulation and a watered-down version of New Deal Keynesian deficit spending remained the remedies favored by serious economists like Josept Stieglitz and Paul Krugman as well as by the unions and by many self-designated Marxists and socialists. They all seemed to believe in ‘state intervention’ as an effective remedy to capitalism’s current crisis. This reformist Left forgot, in its yearning for a solution, that neo-Keynesian state-intervention, designed to save capitalism during the Depression of the 1930’s, arguably didn’t actually succeed, since it took war production to actually end the Depression. | ||
| Certainly ‘Green Jobs’ were something to fight for, but such Keynesian remedies were not even on the radar, much less on the agenda of the neo-liberal governments of the time, whether of the ‘left’ (Obama), ‘right’ (Sarkosy) or ‘center’ (Merkel). In the words of Nobel economist Joseph Steglitz: ‘there was a moment after Lehman Brothers fell, the world came together. We were all Keynesians. That is to say, we all knew that what the economy needed was each country had to stimulate their economy. That moment of global consensus soon vanished. In any case, if the U.S. (or any other G20 government like Britain or Brazil) suddenly turned Leftwards and actually attempteds to regulate the out-of-control securities markets, that government would have been subject to huge fines and penalties from the World Trade Organization. Likewise, massive deficit spending to rebuild infrastructure, even if it had been politically possible, would also have violated international norms and been subject to IMF ‘discipline.’ In any case, after 2016, with the election of Trump, Brexit, and the rise of nationalist, right-wing populism and crony capitalism around the world, from Russia and Turkey to the Phillipines, such reformist and neo-Keynsean proposals became academic. | Certainly ‘Green Jobs’ were something to fight for, but such Keynesian remedies were not even on the radar, much less on the agenda of the neo-liberal governments of the time, whether of the ‘left’ (Obama), ‘right’ (Sarkosy) or ‘center’ (Merkel). In the words of Nobel economist Joseph Steglitz: ‘there was a moment after Lehman Brothers fell, the world came together. We were all Keynesians. That is to say, we all knew that what the economy needed was each country had to stimulate their economy. That moment of global consensus soon vanished. In any case, if the U.S. (or any other G20 government like Britain or Brazil) suddenly turned Leftwards and actually attempteds to regulate the out-of-control securities markets, that government would have been subject to huge fines and penalties from the World Trade Organization. Likewise, massive deficit spending to rebuild infrastructure, even if it had been politically possible, would also have violated international norms and been subject to IMF ‘discipline.’ In any case, after 2016, with the election of Trump, Brexit, and the rise of nationalist, right-wing populism and crony capitalism around the world, from Russia and Turkey to the Phillipines, such reformist and neo-Keynsean proposals became academic. | ||
| + | |||
| Yet much of the traditional Left had not yet understood that under globalized capitalism, the only permissible form of state intervention was when governments -- or supra-governmental organizations like the International Monetary Fund (IMF), World Trade Organization (WTO) and the World Bank -- use state power to ‘open closed markets’ and enforce ‘free trade.’ In practice state-sponsored ‘free trade’ meant enforcing monopoly control over local economies by multinationals like Montsano; it means the appropriation by international capital of the last vestiges of the natural environment and the natural economies (peasants, forest peoples, artisans, small producers) as well as privatizing the remains of public services and social welfare structures. | Yet much of the traditional Left had not yet understood that under globalized capitalism, the only permissible form of state intervention was when governments -- or supra-governmental organizations like the International Monetary Fund (IMF), World Trade Organization (WTO) and the World Bank -- use state power to ‘open closed markets’ and enforce ‘free trade.’ In practice state-sponsored ‘free trade’ meant enforcing monopoly control over local economies by multinationals like Montsano; it means the appropriation by international capital of the last vestiges of the natural environment and the natural economies (peasants, forest peoples, artisans, small producers) as well as privatizing the remains of public services and social welfare structures. | ||
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| Indeed, before 2008, even the few surviving neo-Keynesians who still believed in the need for a minimum of government regulation (like Nobel Prize economist and N.Y. Times columnist Paul Krugman) agreed that the world economic system was ‘fundamentally sound.’ With rare exceptions even avowed Marxists and socialists were no longer expecting the return of the type of generalized capitalist crisis that Marx and Engels had analyzed in the 19th Century and that the 1929 Crash had seemed to confirm. On a few handfuls of die-hard classical classical Marxists saw the Crash of 2008 coming. How come they were right when almost everyone else was wrong? | Indeed, before 2008, even the few surviving neo-Keynesians who still believed in the need for a minimum of government regulation (like Nobel Prize economist and N.Y. Times columnist Paul Krugman) agreed that the world economic system was ‘fundamentally sound.’ With rare exceptions even avowed Marxists and socialists were no longer expecting the return of the type of generalized capitalist crisis that Marx and Engels had analyzed in the 19th Century and that the 1929 Crash had seemed to confirm. On a few handfuls of die-hard classical classical Marxists saw the Crash of 2008 coming. How come they were right when almost everyone else was wrong? | ||
| - | + | === 6. So Marx Was Wrong? === | |
| - | 6. So Marx Was Wrong? | + | |
| Today, looking back over many decades since the final collapse of the capitalist world-system and its replacement with a planetary cooperative commonwealth, the collective blindness of the economists of an early epoch seems in hindsight like a kind of magical belief. Or perhaps a collective state of denial about impending economic catastrophe (as was the case with the impending climate catastrophe). | Today, looking back over many decades since the final collapse of the capitalist world-system and its replacement with a planetary cooperative commonwealth, the collective blindness of the economists of an early epoch seems in hindsight like a kind of magical belief. Or perhaps a collective state of denial about impending economic catastrophe (as was the case with the impending climate catastrophe). | ||
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| Second, Marx’s unfinished Capital was a complex work describing the interaction of many economic, political and historic elments, and thus difficult to understand much less to simplify. Nonetheless, Marx’s analysis of capitalism’s contradictions was interpreted by his followers as ‘predicting’ the imminant fall of the system, and when this predicted final collapse failed to materialise in the century and a half since he published Capital, they got discouraged and revised it or simply gave up on it. What they were unable to understand, and what is clear to us today in hindsight, is that Marx saw capitalism as a self-expanding world-system whose eventually trajectory would be to impose commodity-production on the entire planet. Theoretically, its internal contradictions would eventually undermine it, but as long as it was still expanding into non-capitalist areas, these contradictions would remain as tendencies which could be conteracted by other tendencies, as we shall see. | Second, Marx’s unfinished Capital was a complex work describing the interaction of many economic, political and historic elments, and thus difficult to understand much less to simplify. Nonetheless, Marx’s analysis of capitalism’s contradictions was interpreted by his followers as ‘predicting’ the imminant fall of the system, and when this predicted final collapse failed to materialise in the century and a half since he published Capital, they got discouraged and revised it or simply gave up on it. What they were unable to understand, and what is clear to us today in hindsight, is that Marx saw capitalism as a self-expanding world-system whose eventually trajectory would be to impose commodity-production on the entire planet. Theoretically, its internal contradictions would eventually undermine it, but as long as it was still expanding into non-capitalist areas, these contradictions would remain as tendencies which could be conteracted by other tendencies, as we shall see. | ||
| - | + | === 7. Overproduction and the Decline in the Rate of Profit === | |
| - | + | ||
| - | 7. Overproduction and the Decline in the Rate of Profit | + | |
| This is not the place to summarize the complexities of the three volumes of Marx’s Capital. To simplify, let’s say that the fundamental contradiction in capitalism is in its contradictory relationship with its source of value, labor power, represented by the workers. The bosses are in a classic ‘bad relationship’ with their employees: “they can’t live with ‘em and they can’t live without ‘em.” Capitalist profits derive from surplus value: the difference between what they pay out in wages and materials (themselves products of labor) and the market price of their products. So they use every method they can to cut labor costs by getting rid of the very workers on whom they depend, the employees who by their labor who add value to the capitalists’ products. | This is not the place to summarize the complexities of the three volumes of Marx’s Capital. To simplify, let’s say that the fundamental contradiction in capitalism is in its contradictory relationship with its source of value, labor power, represented by the workers. The bosses are in a classic ‘bad relationship’ with their employees: “they can’t live with ‘em and they can’t live without ‘em.” Capitalist profits derive from surplus value: the difference between what they pay out in wages and materials (themselves products of labor) and the market price of their products. So they use every method they can to cut labor costs by getting rid of the very workers on whom they depend, the employees who by their labor who add value to the capitalists’ products. | ||
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| So much for Marxist theory. But if the system was fundamentally contradictory from the start, how come it worked so well for all these years? In other words, why didn’t capitalism collapse earlier, as had been hoped by generations of socialists? | So much for Marxist theory. But if the system was fundamentally contradictory from the start, how come it worked so well for all these years? In other words, why didn’t capitalism collapse earlier, as had been hoped by generations of socialists? | ||
| - | + | === 8. Historical and Geographical Limits to Capitalist Growth === | |
| - | 8. Historical and Geographical Limits to Capitalist Growth | + | |
| To begin with, in the 19th Century, there were frequent and prolonged crises, with as many years of bust as there were boom years. Moreover, the world economy actually did collapse following the crash of 1929, and most economists today are agreed that it was not Roosevelt’s New Deal but WWII arms production that got the U.S. out of the last Depression. Capitalism thrives on war, and WWII destroyed vast amounts of previously existing wealth. As the result of this ‘creative destruction,’ the endemic plagues of over-production and excess capital were not a problem during capital’s ‘glorious’ thirty-year post-War recovery. | To begin with, in the 19th Century, there were frequent and prolonged crises, with as many years of bust as there were boom years. Moreover, the world economy actually did collapse following the crash of 1929, and most economists today are agreed that it was not Roosevelt’s New Deal but WWII arms production that got the U.S. out of the last Depression. Capitalism thrives on war, and WWII destroyed vast amounts of previously existing wealth. As the result of this ‘creative destruction,’ the endemic plagues of over-production and excess capital were not a problem during capital’s ‘glorious’ thirty-year post-War recovery. | ||
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| By the turn of the 21st century, according to world-systems theorist Immanuel Wallerstein, who studied the economic ‘long waves’ of history at the Braudel Institute, capitalism had finally reached its global limits after a life-cycle of 500 years. From the time of its birth in Europe -- roughly since 1492 and the discovery of gold and silver in the Americas -- capitalism had kept itself profitable over the centuries by expanding into the non-capitalist areas of the planet, enclosing what was previously held in common and searching out new markets and new sources of cheap labor. Yet after the globalization of the 90’s, even these new world markets were becoming more and more saturated. Capital itself had become a glut, and there were no new continents to exploit or new forms of natural wealth to be profitably extracted from the half-ruined global environment. Capitalism had expanded to the earth’s limits and industrialized to the point where one of the 20th century’s poorest and most backward country, China, became the principal competitor to the U.S, the world’s richest and most modern. Thus, less wealth was coming into the world capitalist market from outside the system; hence the 21st century feeding frenzy to gobble up the last surviving stands of rain forest, the last surviving schools of ocean fish, the last reserves of fossil fuels without regard to the obvious environmental consequences. | By the turn of the 21st century, according to world-systems theorist Immanuel Wallerstein, who studied the economic ‘long waves’ of history at the Braudel Institute, capitalism had finally reached its global limits after a life-cycle of 500 years. From the time of its birth in Europe -- roughly since 1492 and the discovery of gold and silver in the Americas -- capitalism had kept itself profitable over the centuries by expanding into the non-capitalist areas of the planet, enclosing what was previously held in common and searching out new markets and new sources of cheap labor. Yet after the globalization of the 90’s, even these new world markets were becoming more and more saturated. Capital itself had become a glut, and there were no new continents to exploit or new forms of natural wealth to be profitably extracted from the half-ruined global environment. Capitalism had expanded to the earth’s limits and industrialized to the point where one of the 20th century’s poorest and most backward country, China, became the principal competitor to the U.S, the world’s richest and most modern. Thus, less wealth was coming into the world capitalist market from outside the system; hence the 21st century feeding frenzy to gobble up the last surviving stands of rain forest, the last surviving schools of ocean fish, the last reserves of fossil fuels without regard to the obvious environmental consequences. | ||
| - | 9. Why 20th Century Capitalism, despite it ‘Contradictions,’ Didn’t Collapse | + | === 9. Why 20th Century Capitalism, despite its ‘Contradictions,’ Didn’t Collapse === |
| Let us recall that the 19th century, the period of capitalism’s greatest growth, was also a period of relative international peace. But by the 1890s, competition among British, French and late-blooming German capitalism for new colonies and markets had become fierce, precipitating an imperialist World War of unprecedented duration (1914-1918) and savagery which signaled the end of capitalism’s progressive era. ‘We now know that civilizations are mortal,’ wrote French poet Paul Valéry. ‘Socialism or Barbarism,’ wrote the revolutionary Rosa Luxemburg. During 1917-1919 a wave revolutions spread from Russia across Germany and Hungary and threatened capitalism’s world hegemony. But the new industrial giants, America and Japan, saved the day for international capitalism and turned back the red tide, leaving economically backward Soviet Russia to degenerate in isolation. This impasse set the stage for the Great Depression, the rise of fascism and the outbreak of another imperialist World War -- this one truly global and even more barbarous than the First. In turn, the destruction by massive aeriel bombardment of huge amounts of productive capital during WWII paved the way for the postwar ‘economic miracle’ led by the defeated Axis powers Germany and Japan. Economically speaking, the losers were the winners. | Let us recall that the 19th century, the period of capitalism’s greatest growth, was also a period of relative international peace. But by the 1890s, competition among British, French and late-blooming German capitalism for new colonies and markets had become fierce, precipitating an imperialist World War of unprecedented duration (1914-1918) and savagery which signaled the end of capitalism’s progressive era. ‘We now know that civilizations are mortal,’ wrote French poet Paul Valéry. ‘Socialism or Barbarism,’ wrote the revolutionary Rosa Luxemburg. During 1917-1919 a wave revolutions spread from Russia across Germany and Hungary and threatened capitalism’s world hegemony. But the new industrial giants, America and Japan, saved the day for international capitalism and turned back the red tide, leaving economically backward Soviet Russia to degenerate in isolation. This impasse set the stage for the Great Depression, the rise of fascism and the outbreak of another imperialist World War -- this one truly global and even more barbarous than the First. In turn, the destruction by massive aeriel bombardment of huge amounts of productive capital during WWII paved the way for the postwar ‘economic miracle’ led by the defeated Axis powers Germany and Japan. Economically speaking, the losers were the winners. | ||
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| The classic capitalist solution to this problem had been expansion into the non-capitalist world, but with the globalization of the ‘90s this expansionism reached it geographical limits with China and India transformed from prey into capitalist tigers, and no place left for expansion and growth other than outer space. So how did capitalism solve the problem of ‘effective demand’ in order to ‘realize’ the surplus value embodied in commodities and make it profitable ? Post-war capitalism came up with three main ways to get us consumers and taxpayers to pay for all this stuff we don’t need and can’t afford: war production, advertising and credit. | The classic capitalist solution to this problem had been expansion into the non-capitalist world, but with the globalization of the ‘90s this expansionism reached it geographical limits with China and India transformed from prey into capitalist tigers, and no place left for expansion and growth other than outer space. So how did capitalism solve the problem of ‘effective demand’ in order to ‘realize’ the surplus value embodied in commodities and make it profitable ? Post-war capitalism came up with three main ways to get us consumers and taxpayers to pay for all this stuff we don’t need and can’t afford: war production, advertising and credit. | ||
| - | 10. War Production | + | === 10. War Production === |
| Let’s start with war production, also known as ‘military Keynesianism’ -- an ironic reference to the progressive 1930s economist who advocated major government spending on public works like bridges and highways as a solution to recession. As early as 1960, outgoing Republican President and former WWII Allied Commander Dwight Eisenhower, no peacenik he, sounded a solemn warning that a ‘military-industrial complex’ (MIC) was taking over the government and the economy. Under Obama, the official military budget – not including the un-counted pieces of it stashed among other agencies like Homeland Security, the CIA, the Energy Department, and the State Department -- amounted to nearly a quarter of federal expenditures, more like a third if we include the interest on the debt produced by the ‘Three Trillion Dollar War’ in Iraq (also not included in the official military budget presented to Congress). After 2016, with bellicose America-firster Trump in the White house surrounded by generals, these profits increased expotentially as did the influence of the MIC and the global petroleum interests it defended. | Let’s start with war production, also known as ‘military Keynesianism’ -- an ironic reference to the progressive 1930s economist who advocated major government spending on public works like bridges and highways as a solution to recession. As early as 1960, outgoing Republican President and former WWII Allied Commander Dwight Eisenhower, no peacenik he, sounded a solemn warning that a ‘military-industrial complex’ (MIC) was taking over the government and the economy. Under Obama, the official military budget – not including the un-counted pieces of it stashed among other agencies like Homeland Security, the CIA, the Energy Department, and the State Department -- amounted to nearly a quarter of federal expenditures, more like a third if we include the interest on the debt produced by the ‘Three Trillion Dollar War’ in Iraq (also not included in the official military budget presented to Congress). After 2016, with bellicose America-firster Trump in the White house surrounded by generals, these profits increased expotentially as did the influence of the MIC and the global petroleum interests it defended. | ||
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| Bush II’s Iraqi War alone cost us tax-payers an estimated three trillion dollars. How much of that mind-boggling sum ended up as profits for the stockholders of Halliburton, Blackwater, Brown & Root, MacDonnell-Douglas and the rest of the war-profiteering cost-overrun contractors? A trillion? No wonder there was no money left for body armor for the troops or veterans’ benefits for the wounded. The pubic, outraged, Mr. Obama, who promised withdraw our troops – many of them reservists serving their second, third or even fourth tour of duty – from the Iraqi quagmire. Only later did votes realize that he was sending them into an even deeper quagmire in Afghanistan. Under Trump, things went from bad to worse with the U.S. engaged in endess wars in Africa and military contractors thriving. | Bush II’s Iraqi War alone cost us tax-payers an estimated three trillion dollars. How much of that mind-boggling sum ended up as profits for the stockholders of Halliburton, Blackwater, Brown & Root, MacDonnell-Douglas and the rest of the war-profiteering cost-overrun contractors? A trillion? No wonder there was no money left for body armor for the troops or veterans’ benefits for the wounded. The pubic, outraged, Mr. Obama, who promised withdraw our troops – many of them reservists serving their second, third or even fourth tour of duty – from the Iraqi quagmire. Only later did votes realize that he was sending them into an even deeper quagmire in Afghanistan. Under Trump, things went from bad to worse with the U.S. engaged in endess wars in Africa and military contractors thriving. | ||
| - | 11. The Devil in the Zeros | + | === 11. The Devil in the Zeros === |
| - | One reason public lets the military-industrial complex got away with this boondoggle is that most people’s eyes fogged over when they saw all those zeros. The sums involved are literally mind-boggling. Did three trillion 2017 dollars mean $3, 000, 000, 000, 000? Or merely $3, 000, 000, 000? The devil was in all those zeros, and the difference between millions, billions and trillions can confuse you, as it did the taxpaper of the early 21st century. Here’s how to keep them straight. According to a math-for-dummies book entitled Innumeracy, a million seconds in time add up to about 12 days. A billion seconds, on the other hand, equal nearly 32 years or half a lifetime. As for a trillion seconds, that makes 32 thousand years, which would take us back to the early Stone Age (or to 27 thousand years before the Creation if you don’t believe in Evolution). If the three trillion dollars spent on the Iraqi war were seconds, they would stretch back in time to before the emergence of the first modern humans. | + | One reason the public lets the military-industrial complex got away with this boondoggle is that most people’s eyes fogged over when they saw all those zeros. The sums involved are literally mind-boggling. Did three trillion 2017 dollars mean $3, 000, 000, 000, 000? Or merely $3, 000, 000, 000? The devil was in all those zeros, and the difference between millions, billions and trillions can confuse you, as it did the taxpaper of the early 21st century. Here’s how to keep them straight. According to a math-for-dummies book entitled Innumeracy, a million seconds in time add up to about 12 days. A billion seconds, on the other hand, equal nearly 32 years or half a lifetime. As for a trillion seconds, that makes 32 thousand years, which would take us back to the early Stone Age (or to 27 thousand years before the Creation if you don’t believe in Evolution). If the three trillion dollars spent on the Iraqi war were seconds, they would stretch back in time to before the emergence of the first modern humans. |
| Now let’s review: A million=12 days; a billion=32 years; a trillion= Back to the Stone Age. It was hard for the public to remember these differences of scale as the latest budget figures flickered over their TV screens. | Now let’s review: A million=12 days; a billion=32 years; a trillion= Back to the Stone Age. It was hard for the public to remember these differences of scale as the latest budget figures flickered over their TV screens. | ||
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| As a result, what they used to call the ‘working middle class’ (and the Marxists called ‘the proletariat’) with its small and shrinking share of the national wealth, payed an astounding 85% of the nation’s taxes in 2009. This figure increased in 2017 after the major cuts in corporate taxes under Trump. Thus, in macro-economic terms, military spending was an indirect transfer of wealth from the poor (employees) to the rich (owners) via government intervention. Another miracle of the American free enterprise system! Moreover, as we have seen the enormous portion of the total national capital invested in government-financed military production was sheltered from the normal capitalist plague of overproduction and shrinking markets. Its rate of profit was correspondingly high, which helped raise the overall capitalist average. Moreover, military products were not only profitable, they were useful in defending corporate interests abroad and for putting down the rabble at home when they finally got wise to the corporate scam and started fighting back. Thus, for nearly a century, military Keynesianism helped stave off capitalist collapse by absorbing a huge share of the nation’s excess industrial production at taxpayer expense, in effect transferring wealth from the bottom of the economic pyramid to the top. And military spending was only the first of capitalism’s post-WWII world war tricks, which also included advertising, consumer glut and credit. | As a result, what they used to call the ‘working middle class’ (and the Marxists called ‘the proletariat’) with its small and shrinking share of the national wealth, payed an astounding 85% of the nation’s taxes in 2009. This figure increased in 2017 after the major cuts in corporate taxes under Trump. Thus, in macro-economic terms, military spending was an indirect transfer of wealth from the poor (employees) to the rich (owners) via government intervention. Another miracle of the American free enterprise system! Moreover, as we have seen the enormous portion of the total national capital invested in government-financed military production was sheltered from the normal capitalist plague of overproduction and shrinking markets. Its rate of profit was correspondingly high, which helped raise the overall capitalist average. Moreover, military products were not only profitable, they were useful in defending corporate interests abroad and for putting down the rabble at home when they finally got wise to the corporate scam and started fighting back. Thus, for nearly a century, military Keynesianism helped stave off capitalist collapse by absorbing a huge share of the nation’s excess industrial production at taxpayer expense, in effect transferring wealth from the bottom of the economic pyramid to the top. And military spending was only the first of capitalism’s post-WWII world war tricks, which also included advertising, consumer glut and credit. | ||
| - | 12. Advertising | + | === 12. Advertising === |
| We now look at how advertising helped prolong capitalism’s continuing vampire after-life. Conceived by the most subtle psychologists and sociologists, designed and produced by the most talented and highest paid writers and artists, incessantly beamed at the public through media that celebrate consumerism, modern advertising created a culture in which people’s sense of status depended less on what they really were than on the commodities they wore, ate, drank, or drove. Although it is based on competition between rival brands, all advertising is objectively ‘capitalist propaganda’ -- that is to say propaganda in favor of consumer capitalism. This is not a ‘crude Marxist caricature.’ ‘Propaganda’ was the precise word used in 1928 by Edward Bernays, the genius of modern advertising, who considered it ‘necessary in a democratic society’ and invented a new name for it: ‘public relations.’ | We now look at how advertising helped prolong capitalism’s continuing vampire after-life. Conceived by the most subtle psychologists and sociologists, designed and produced by the most talented and highest paid writers and artists, incessantly beamed at the public through media that celebrate consumerism, modern advertising created a culture in which people’s sense of status depended less on what they really were than on the commodities they wore, ate, drank, or drove. Although it is based on competition between rival brands, all advertising is objectively ‘capitalist propaganda’ -- that is to say propaganda in favor of consumer capitalism. This is not a ‘crude Marxist caricature.’ ‘Propaganda’ was the precise word used in 1928 by Edward Bernays, the genius of modern advertising, who considered it ‘necessary in a democratic society’ and invented a new name for it: ‘public relations.’ | ||
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| Postwar advertising and marketing in the U.S. were successful in creating new internal markets up through the ‘70s. They got lots of people wanting to buy things they never knew they couldn’t do without. But with downsizing, union-busting, automation, rising prices and stagnating wages, people no longer had the cash. No problem: capitalism had an answer. ‘Can’t afford that new car? Don’t worry. You don’t have to pay for it … now. Step right over to our Credit Department. That smiley gentleman in the sharkskin suit is waiting to take care of you. What our brilliantly creative advertising department has cleverly seduced you into buying, Mr. Loanshark in our friendly credit department will cheerfully help you pay over time for a small monthly fee. No need to read all that teensy little fine print at the bottom where it says ‘interest annualizes at an average of 31.6%. . . .’ | Postwar advertising and marketing in the U.S. were successful in creating new internal markets up through the ‘70s. They got lots of people wanting to buy things they never knew they couldn’t do without. But with downsizing, union-busting, automation, rising prices and stagnating wages, people no longer had the cash. No problem: capitalism had an answer. ‘Can’t afford that new car? Don’t worry. You don’t have to pay for it … now. Step right over to our Credit Department. That smiley gentleman in the sharkskin suit is waiting to take care of you. What our brilliantly creative advertising department has cleverly seduced you into buying, Mr. Loanshark in our friendly credit department will cheerfully help you pay over time for a small monthly fee. No need to read all that teensy little fine print at the bottom where it says ‘interest annualizes at an average of 31.6%. . . .’ | ||
| - | 13. Death on the Installment Plan | + | === 13. Death on the Installment Plan === |
| All through the roaring ‘80s and beyond, financialized U.S. capital gorged on double-dip profits, making people work for less and loaning them money at interest to keep consuming. Thanks to Our Mr. Loanshark it was another win/win situation for the capitalists, who convinced themselves that this debt-fueled economy could go on forever and that ‘overproduction’ was a Marxist myth. So let’s take look at credit, or rather at its dark twin, debt. It’s a subject that makes everybody cringe, so let’s start with a simple definition: under capitalism ‘debt’ means ‘bank profits’. The more the banks lend, the richer they get. And thanks to the ‘miracle of compound interest,’ bank profits pile up quickly and soon overtake ‘principle’ (the original amount people need to borrow). If they had trouble paying, Mr. Loanshark would happily offer them new loans to ‘consolidate’ their previous obligations and spread them over time, thus multiplying their debt obligation. As long as the payments keep coming in, and ballooning, the loansharks and mega-banks didn’t care if they ever got their principle back. (The same principle applied to the IMF/World Bank-imposed debts of the so-called developing nations). | All through the roaring ‘80s and beyond, financialized U.S. capital gorged on double-dip profits, making people work for less and loaning them money at interest to keep consuming. Thanks to Our Mr. Loanshark it was another win/win situation for the capitalists, who convinced themselves that this debt-fueled economy could go on forever and that ‘overproduction’ was a Marxist myth. So let’s take look at credit, or rather at its dark twin, debt. It’s a subject that makes everybody cringe, so let’s start with a simple definition: under capitalism ‘debt’ means ‘bank profits’. The more the banks lend, the richer they get. And thanks to the ‘miracle of compound interest,’ bank profits pile up quickly and soon overtake ‘principle’ (the original amount people need to borrow). If they had trouble paying, Mr. Loanshark would happily offer them new loans to ‘consolidate’ their previous obligations and spread them over time, thus multiplying their debt obligation. As long as the payments keep coming in, and ballooning, the loansharks and mega-banks didn’t care if they ever got their principle back. (The same principle applied to the IMF/World Bank-imposed debts of the so-called developing nations). | ||
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| In 2008, the credit bubble popped, leaving millions of Americans high and dry with half-empty retirement funds, homes worth less than the outstanding mortgage, shuttered businesses and no jobs. As we have seen, the principal effect of the Great Bailout was to transform accumulated capitalist debt into taxpayer debt. Debts to be repaid by all those little people who used to have productive jobs. And since the ‘reform’ of personal bankruptcy laws, debtors will had to keep paying installments indefinitely on their educations, cars and houses, even after they have been forced to sell them at a loss. Apparently the Crash of 2008 was caused by their fecklessness. According to the Times in 2008: “A growing chorus in conservative circles is trying to shift the blame for the current crisis to the poor and advocates for the poor.” In any case, having been reliquidified at public expense in order to get them lending again, the big banks have raised interest on consumer credit cards to new heights – up to 33% annualized. Even Barak Obama ‘the Banker’s Friend’ has been obliged to sternly scold them (if not actually to regulate them). | In 2008, the credit bubble popped, leaving millions of Americans high and dry with half-empty retirement funds, homes worth less than the outstanding mortgage, shuttered businesses and no jobs. As we have seen, the principal effect of the Great Bailout was to transform accumulated capitalist debt into taxpayer debt. Debts to be repaid by all those little people who used to have productive jobs. And since the ‘reform’ of personal bankruptcy laws, debtors will had to keep paying installments indefinitely on their educations, cars and houses, even after they have been forced to sell them at a loss. Apparently the Crash of 2008 was caused by their fecklessness. According to the Times in 2008: “A growing chorus in conservative circles is trying to shift the blame for the current crisis to the poor and advocates for the poor.” In any case, having been reliquidified at public expense in order to get them lending again, the big banks have raised interest on consumer credit cards to new heights – up to 33% annualized. Even Barak Obama ‘the Banker’s Friend’ has been obliged to sternly scold them (if not actually to regulate them). | ||
| - | 14. Capitalism’s Terminal’ Crisis | + | === 14. Capitalism’s Terminal’ Crisis === |
| As we have seen, by capitalism, vigorous and progressive in the 19th Century, was already decadent by the early 20th. It was already financialized, monopolized, and dependant on colonial expansion in 1914, when its imperialist rivalries exploded into the first of two World Wars whose barbarism – applying capitalist mass production methods to the destruction of civilian facilities and populations – arguably surpassed that of Attila the Hun. Between the two global holocausts, capitalism engendered the first true world-wide depression, which hit Europe long before it affected the U.S. and engendered state-capitalist ‘solutions’ as varied as Roosevelt’s New Deal, Stalin’s Five Year Plan and Hitler’s Thousand-Year Reich. | As we have seen, by capitalism, vigorous and progressive in the 19th Century, was already decadent by the early 20th. It was already financialized, monopolized, and dependant on colonial expansion in 1914, when its imperialist rivalries exploded into the first of two World Wars whose barbarism – applying capitalist mass production methods to the destruction of civilian facilities and populations – arguably surpassed that of Attila the Hun. Between the two global holocausts, capitalism engendered the first true world-wide depression, which hit Europe long before it affected the U.S. and engendered state-capitalist ‘solutions’ as varied as Roosevelt’s New Deal, Stalin’s Five Year Plan and Hitler’s Thousand-Year Reich. | ||
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