Capitalism will last forever or maybe not

Published online 22 June 2014.

The topic of capitalism’s eventual death has been around for more than 150 years now.  At one early point (1847) in his career as a writer, Karl Marx (with his friend Friedrich Engels) thought the death of capitalism was imminent.  He even thought he could specify the mechanism by which this would happen.

The advance of industry, whose involuntary promoter is the bourgeoisie, replaces the isolation of the labourers, due to competition, by the revolutionary combination, due to association. The development of Modern Industry, therefore, cuts from under its feet the very foundation on which the bourgeoisie produces and appropriates products. What the bourgeoisie therefore produces, above all, are its own grave-diggers. Its fall and the victory of the proletariat are equally inevitable.

Things, of course, didn’t work out that way.  About seventy years later the activist parties registered their preferences for social democracy, while rejecting Lenin’s Third International vision of the communist movement in western Europe.  Julius Braunthal’s “History of the International” describes this historical development in detail.  In political terms, the failure of the communists to have everyone unite under their banner after World War I resulted in a split in allegiances between communist and social-democratic forces.  This split in allegiances ultimately resulted, for instance, in the situation in Germany after the election of November 1932, when the SPD and the KPD might have formed a coalition government had they agreed to do so — and instead Germany drifted into Hitler’s rule — more capitalism, of the worst sort.With hindsight we can see (through the lens offered us by Antonio Gramsci) that the hardline revolutionaries of the early and mid-20th century were wrong to assume that a government by the intelligentsia (which was what the Soviet Union was) would make a good substitute for real communism.  They tried hard, but in the end it had to look good rather than being good.  If you want real communism, then, you need to replace hegemonic rule entirely — the “dictatorship of the proletariat” has to be real rule by the working class, and not rule by the intelligentsia and their Party.  In that light, the Soviets merely replaced the Czar’s hegemonic rule with a hegemonic rule of their own, which was replaced by capitalist hegemony when Boris Yeltsin dissolved the Soviet Union.  Game over.

The problem with the Soviet vision, then, is one shared by many forms of elitism — when you have rule by an elite, that elite is most likely to choose that form of rule which offers the most secure guarantee of keeping them on top.  At some point that security of Russian elites was offered by capitalism, as it was offered after Mao’s death to the Chinese elites.  Thus at some point, as Boris Kagarlitsky points out, the elites of the Soviet Union “switched sides” and joined forces with global neoliberalism, which is what we today call its “collapse.”

The Soviet Union’s “collapse” nonetheless generated several literary sources which brought up the possibility that the capitalist world system might also eventually collapse.  This literary notion appears in several places — Alex Callinicos’ The Revenge of History, for instance, but most respectably Gopal Balakrishnan’s (2009) essay “Speculations on the Stationary State,” as published in the New Left Review.  Balakrishnan tells us:

In their own ways, both bureaucratic socialism and its vastly more affluent neo-liberal conqueror concealed their failures with increasingly arbitrary tableaux économiques. By the 80s the gdr’s reported national income was revealed to be a statistical artifact that grossly inflated its cramped standards of living. But in the same decade, an emerging circuit of global imbalances was beginning to generate considerable problems for the measurement of capitalist wealth. The coming depression may reveal that the national economic statistics of the period of bubble economics were fictions, not wholly unlike those operative in the old Soviet system.

Now of course the Soviet Bloc had a competitor system, unlike the capitalist world system, which recognizes no competition.  But the issue with both systems is the same; it’s the issue recognized at the end of Robert Brenner’s (2007) The Economics of Global Turbulence:

The odds therefore favor a still further opening up of the already enormous chasm between the income and profits actually produced by the world economy and the paper claims generated by it… (343)

The thought, then, is that eventually the system collapses because its visions of profit and success become a fantasyland of complete irrelevance to the disaster which will be happening on the ground.  This issue reappears, at least in my interpretation, in a recent posting in Yves Smith’s blog Naked Capitalism.  One of the most prominent developments of capitalism in this era has been the ever-increasing role of government in propping up the activities of capitalists so that the economy-as-a-whole is not brought to ruin by what they do.  Yves Smith’s conclusion to this piece (“The Fed’s Ever Burgeoning Market Support”) is telling:

The third worrisome piece was by Pimco’s Paul McCulley, Make shadow banks safe and private money sound, which called for the Fed to backstop shadow banks. The fact that it did that during the last crisis (and the market expects that to happen again) does not make it sound policy. Financial claims are already a huge multiple of the real economy. Throwing more guarantees underneath them will only lead to the creation of even more speculative product. While it makes sense to prevent the collapse of the financial system, that needs to include serious penalties with no discretion, including the ouster of the management and repayment of the assistance out of firm capital over time. The price of a rescue has to be huge penalties for the firm and its key decision-makers or they will just pile on risk.But this is where we are. Our central bank seems happy to be the counterparty of the last resort and absorb all sorts of risks so as to provide smooth sailing for financiers. Where this ends I cannot fathom, but I do not expect it to be pretty.

Smith lays it out nicely, to be sure.  But her next step in logic here needs to be this: if the financial claims in sum amount to “huge multiples of the real economy,” and if everyone is speculating in these huge multiples, why would the government try to rein in this speculation?  The idea behind “speculation” (actually a government guarantee of profits to businesses “too big to fail”) to keep the elite profiteers in power while at the same time preserving “normalcy.”  What about prohibiting the “piling on of risk” does that?The idea behind all of these (basically correct) observations is that as the “balance sheet” of the capitalist world system rests on a series of barely-believable fictions, government power (e.g. the Fed, but also “loans” and increasing direct subsidy) is increasingly needed to hold the process together, to preserve the ground-level appearance of normalcy as the capitalists’ numbers increasingly fail to “add up.”  At some point, however, we might expect a government abolition of numbers in order to preserve whatever shoestring version of normalcy will guarantee “capitalist” hegemony, while at the same time real capitalism will have been replaced by what will then be an even more secure guarantee of elite hegemonic rule than capitalism can offer.  In other words, the elites might just abolish capitalism all by themselves.

(Oh, sure, the resultant authoritarianism might call itself “capitalism,” in much the same way that the empire of the Greeks called itself the “Roman Empire” until its demise in 1453.  But it wouldn’t be the same.)

Why would that happen?

Let’s start with the global economic growth rate, now in its fifth decade of decline.  Capitalism is dependent upon growth — growth is the expansion of value, which allows you to keep paying your bills.  This is true especially if your bills are for money lent at interest (which is rather oppressively true for those who are stuck in the escalating student loan treadmill) or if you are paying rent (which is money granted to the gentry for the privilege of one’s not being homeless).  So, OK, you “make money.”  Where does it come from?  Corporations?  The Federal Reserve?  The money supply keeps expanding, but this expansion doesn’t cause hyperinflation because there’s a continual expansion of value.  Well, that’s economic growth.  And it’s been declining for four decades now, though it still has its ups and downs from year to year.

But profits are up like crazy!  I hear you say.  Well OK.  But if the profit phenomenon is based on stuff like this, how long can that last?

And what happens when the global economy actually maxes out the planet and starts to shrink?  If this actually happens, it will start to look like a radical transformation of ecosystem relations — a depletion of ecosystem diversity followed by a transformation of economic relations.  This is what we can expect from a reading of Jason W. Moore’s most recent essay, “The End of Cheap Nature.”  Moore allows us to see “capitalist exhaustion,” as I’ve noted its signs above, as an attribute of the natural world.  His analysis may seem at first to be a bit distant — but that’s because he’s arguing up a metalevel, and because his specialty is environmental history.  I will explicate the usefulness of “The End of Cheap Nature” below the noodle.

A good starting place to understand Moore’s leap is to look at the writings of someone who doesn’t appear to have made such a leap.  Here I will start with David Harvey, whose most recent (2014) book Seventeen Contradictions and the End of Capital appears as a sort of glossary of contradictions of capitalism, explored as reasons why the system might come to an end.  In each case Harvey hedges his bets — a contradiction is “dangerous” but won’t by itself be the reason capitalism ends.

Harvey has a chapter on “capital’s relation to nature,” and this is already wrongfooting the problem from Moore’s perspective.  Capital is part of nature, so capital has a relation within nature, but not with nature.  Here is what Harvey says:

If there are serious problems to the capital-nature relation, then this is an internal contradiction within and not external to capital.  We cannot maintain that capital has the power to destroy its own ecosystem while arbitrarily denying that it has the potential power to cleanse itself and resolve or at least properly balance its internal contradictions. (259)

But capital doesn’t really “cleanse itself.”  Capital is not a form of magic.  Rather, as Moore points out elsewhere, the “industrial revolutions” of capitalist history opened up new realms of cheap resources for capital to exploit, and capital “discovered” and took advantage of these revolutions.  Here’s how Moore describes the same thing as Harvey described, only better:

The problem for capital is that the strategies that create the Four Cheaps are “one – off” affairs.  You cannot discover something twice. The idea of nature as external
has worked so effectively because capital must constantly locate natures external to it. Because these natures are historical and therefore finite, the exhaustion of one historical nature quickly prompts the “discovery” of new natures that deliver yet untapped sources of unpaid work.

Thus capital’s ability to “cleanse itself” is predicated upon a rediscovery of nature such that nature is found again through “cleaner” (and, more importantly for capital itself, cheaper) “relations to nature.”  This doesn’t appear to be happening now.  Moore (2012) tells us in “Cheap Food and Bad Money”:

After three decades of seemingly breakneck technological innovation, there is little prospect of a new labor productivity revolution. Indeed, given the progressive erosion of the Four Cheaps, a significant increase in labor productivity might well drive up input costs and fetter profitability. The upshot? The cheapness of these vital commodities in the neoliberal era has relied less on rising efficiencies in production and much more upon the coercive dispositions of the state-finance nexus. (234)

So here’s how it works.  Capital makes a profit through production in good times, in eras of the Four Cheaps.  It appropriates labor-power and “natural resources” to create commodities, and then sells them to realize its profits.  When the profit-rate on this activity isn’t high enough, the capitalists seek refuge in the coercive paper-maze that we call “finance.”  A crisis in “finance” (most recently in 2008-2009) allows government to step in to preserve capitalism on the grounds of further inequality: capital is bailed out, but not labor.  Capital moves to appropriate labor unfairly, on the grounds of greater and greater impunity.  These moves, of course, are all part of capital’s cheapening strategy.  Absent any technosocial transformation, however, such moves aren’t robust, and they won’t provide an indefinite basis for profit in the medium-term future.  Meanwhile, global warming will be raging unchecked.Moore’s concern, then, is that the historical time of the Four Cheaps is running out.  This suggests an eventual end to the capitalist system, although this may occur via a transformation that simply makes capitalism into something we don’t recognize as such.  I’m not going to go over Moore’s hard data — but here’s his concluding reflection:

The problem today is the end of the Capitalocene, not the march of the Anthropocene. The reality is not one of humanity “overwhelming the great forces of
nature” (Steffen, et al., 2011), but rather one of capitalism exhausting its cheap nature strategy.

So when cheap nature is over, then what?  Do the elites decide that you should sign up for your subordination online, via an electronic feudal contract?  Or, as more and more people realize the system offers them no hope, does working-class solidarity create a system for itself?


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