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Capitalism Will Last Forever or Maybe Not

At one early point in his career as a writer, Karl Marx thought the death of capitalism was imminent, that was 1847.

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?

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Capitalism Will Last Forever, Or Maybe Not

In 1847, Karl Marx thought the death of capitalism was imminent.

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:

(more…)

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