Post 2008 Great Recession
Since the Great Recession of 2008-2009, confidence has been shaken in the dominant industry within contemporary capitalism: finance, as seen particularly in the USA. Financial crisis spawned by deregulation appears now to be an accepted norm of the financial capitalist system: Banks and "too big to fail" investment firms keep private profit but pass on risks to taxpayer bailouts. However, citizens and taxpayers despise this privilege and subsidy to the rich. Other grievances contribute to the withdrawal of citizen support,k some depicted below.
Further, capitalism excludes non-monetized potential and activities, ignoring other forms of value creation such as households (families) and communities. So, I will break down these flaws and vulnerabilities (not all the cause of capitalism) into several interactive categories that I will then explain as systems dynamics. This is the foundation from which to understand contradictions and forfeited potential within capitalism.
Capitalism is being questioned:
"A decade ago, 80 percent of Americans agreed with the statement that a free market economy is the best system. Today, it is 60 percent, lower than in China. One recent poll found that only 42 percent of millennials supported capitalism. In another, a majority of millennials said they would rather live in a socialist country than a capitalist one" (Vox, Is America's Future Capitalist or Socialist).
Is socialism now the Green New Deal? The extension of the Welfare State? Redistribution of income? Agitprop? Will capitalism wither or be supplanted? Soon? Emphatically not: Capitalism will certainly continue until well after 2050, but will have molted into another form. These forces listed below, among others, will shape that future.
- Dark Money openly maintain rule, not merely as old-fashioned lobbying and campaign donations. Braudel warned about this level that hides its tentacles of power.
- The USA captures much of my attention as the pinnacle of financial capitalism and militarism.
- The challenge for Great Power hegemony will come from China's state-capitalism, while Russia will continue is stealth attack on American democracy.
Everything changes: capitalism will adapt, China will assert its presence in Asia, global warming's impacts will grow more severe, and the USA will decline. Bets taken.
Reactionary movements infect some industrialized nations, including the election of President Donald Trump in the USA and the Brexit mandate in England. Migrants flee hotter, drier, often war torn equitorial regions, heading to more prosperous and more secure countries to the north. Although nominally Christian, these nations resist, ofter with cruelty such as the separation of children from parents at the U.S. southwest border. The march from south to north will not cease anytime soon.
I will here speculate as to how to morph capitalism toward a just, sustainable, and climate-benign settling of earth by humanity, which I call reinhabitation. I aspire to provide an informed strategic synthesis, or at least state that I saw a calamity on the horizon and tried to light a path.
Slowing Long-Term Growth: Demographic and Economic
Slowing economic growth (stagnation) has weakened capitalism since the mid-1970s. This trend will persist in the USA and other (generally) rich nations (OECD) as the size of the workforce decreases and ages and as productivity encounters inexplicable long-term decline. A compelling argument is made by Robert J. Gordon on this decesive trend. Since WWII, a global regime dedicated to monetized material growth (GDP)has dominated policy virtually worldwide. The rewards appeared broadly shared until the mid-1970s, but has skewed toward the ultra-rich since, with the accompanying grasp of political power. Eventually, profits will shrink and capital accumulation with declining profit and, as we will see below, much higher interest rates. Capitalism contains its inherent macro-economic dynamics (Shah). What goes up can go down, and probably will. Watch closely.
Productivity, exacerbated by the Great Resignation from the labor force, continues to lags, throttled by supply-chain impediments such as ships awaiting in Long Beach-Los Angelos. Productivity has been lagging, as indicated by the important work of Robert S. Gordon. Calculate this: a tautology of GDP metric is that labor force multiplied by productivity defines GDP. Both are sinking, so expect GDP to stagnate, with a rise in prices: Stagflation? What's the point of economic growth if the hassles stay and the rewards go away?
Population Growth Slows
Global human population growth is levelling off, approaching zero population growth (ZPG) in the richer nations of the northern hemisphere (OECD in the jargon of the United Nations). This means that fewer workers will be available (and may not be needed as technology advances) and that aggregate consumption will also diminish. The interactions of GDP stagnation and slower population growth will lower revenues and profits for businesses --- and profit is the engine of capitalism (Shah). See my blog posts, "World Population Stabilizing" and "Degrowth #2: Population".
Meanwhile, inequality within nations soars, excluding large portions of the citizenry from the gains of GDP and the accumulation of wealth. Recently, reactionary forces gather discontent, channeling resentment toward such scapegoats as dispossessed refugees, the multitude of people seeking refuge as they travel from south to north --- an ugly spectacle.
However, less affluent nations expand monetized, market-based economic activity and population faster than mature economies, so a worldwide convergence of GDP per capita among nations is underway (Pikkety). The resulting "ecology of rich and poor" has the potential to intensify environmental justice concerns as the planet heats up and equatorial regions become uninhabitable.
Capitalism remains partial as a mode of production of value in our lives, excluding huge swaths of humanity: The status of women must be addressed, for example. This largely dis-valued majority of humanity will surface as a force for participation, self-improvement, and justice. This trend is happening around us today, often hidden from view, crying out for disclosure, emulation, and sharing. Families, communities, culture, the public sphere (despite capitalism's inhospitality), non-monetized activty outside the ken of markets and thus capitalism, the services provided by nature and the earth, et al. provide a fuller array of means.
The State and Public Policy: Fiscal Crises, Failed States, Crony Capitalism
The response to the concerns about inequality and global warming demonstrates why I have noted that national brands of capitalism have been organized in different ways. Note that despite the aggressive move toward neoliberalism (Harvey) the woof and warf of capitalisms pose different challenges, merge in a variety of patterms, and institute markets differently. Thus, as I have noted: cracks appear. Despite Bretton Woods in July1944, capitalism remains decentered, but not without power struggles, such as between the USA and England after World War II and currently between the USA and the rising Great Power, China. However, the rest of Asia (including India), South America, and Africa remain dependent on long distance trade and finance on the rich nations. The most troubling instances are Failed States that cannot provide security, basic needs (particularly to women and children), and harbor terrorist cells (Haas).
As a citizen of the USA, I will focus here on the particularly virulent neoliberal regime that harkens back to President Jimmy Carter, a Democrat, through the Reagan Revolution, past the administrations of both Presidents Bush, and what I regard as relatively moderate Democratic Presidents, Bill Clinton and Barack Obama, into the present rogue Presidency of Donald J. Trump. The USA has notoriously quit the Paris Climate Treaty and has attacked climate science. As I write, the USA has opened trade wars with China, with the EU, and with Mexico --- illustrating the cracks within global capital. My argument is that the State tends to be held captive to capitalist interests, promotes capital over all else, and follows the dictates of Dark Money.
Governments, especially in the USA, practice the political expedience of deficit spending by forgiving taxes on the rich (mostly capitalist income), shred the social safety net underneath capitalism, and expand military forces and arms subsidies. Burgeoning deficit spending creates national debt surges, especially since the low-interest rates since 2008. Inevitably, fiscal crises will intensify austerity on deprived citizenry. Neglected roads, airports, available broadband in rural regions, bridges and other civil engineering infrastructure will continue to decay. The rich, gathering in armored enclaves, will separate from the others, creating a compulsion to suppress democracy so as to control restless populations.
Rather than using public policy to provide solutions, the "starve the beast" ideology of neoliberalism will intensify the overall crisis of capitalism. As new and unforeseen dilemmas arise such as Black Swans (below) the institutional capability to respond will have been spent. Regional and global calamities such as Puerto Rico and Houston in the USA will be more likely and harder to fix.
The ensuing geopolitics will resemble shifting tectonic plates. The USA will be hardest hit, with the fuller realization that despite high, but stagnating and inequitable, per capita income, its indicators of well being, including longevity, infant and maternal mortality, democratic practices, happiness, and environmental stress put the USA behind most industrialized countries and even behind some developing nations (see Costa Rica and Cuba). Meanwhile, rising superpower China shifts awkwardly to a consumer-based economy despite its mounting piles of debt, and expands its influence through its Belt and Road colonization, along with the debt service and resource grabs it imposes on its client states. The EU stagnates. Southeast Asia, a mixed group, sees its denser and poorer nations (Bangladesh, Pakistan) deteriorate with climate damage. India, like China, a population and land mass giant, strains to control its internal ethnic, class, and regional disputes. Little cooperation on global warming or economic globalization can be anticipated.
Global Warming, Impacts, and Responses
In this context, consider global warming. With every scientific report, the gravity of global warming becomes more severe. Still, the largely unknown global and regional impacts have not come into focus. The resistance to prevention stiffens as the ideology of denial backed by the Dark Money that benefits from what Naomi Klein dubs Disaster Capitalism.
Demands for "armoring" cities and regions with dikes and impoundments will intensify as will calls for assistance with the damage of other "natural" disasters such as floods, tornadoes, fires, drought, crop losses, pest infestation, etc. Patronage and pork will add another facet --- witness the plight of Puerto Rico after Hurricane Maria. In a fiscal crisis, such relief can only go to the Social Darwinists who, ironically, created the havoc. More control, more military, more repression can be applied, for a while. The seminal Stern Report anticipates a decline of 5% to 8% of global GDP to respond to lost productivity and social overhead capital.
Extinction, rampant ecocide, and the pllunder of global and regional Commons will accelerate. Capitalism could go cannabilistic or find ways to profit from such disasters. Nations will be engulfed in havoc. Death rates will soar while fertility sinks. By 2050, the human population will be less than as I write in the spring of 2019 (Randers).
Do not expect a commensurate response to global warming until the damage has been thoroughly baked in: Too late. The ensuing catastrophe wil be appalling and irreversible. The astonishing injustices will exacerbate all of the above contradictions of capitalism. As tipping points arise unexpectedly early, as feedbacks spin out of control, the only path left will be overt geopoolitcal and subnational mayhem resembling a world war (Dyer). Population will fall precipitously with the earth's diminished carrying capacity, market-based GDP will sharply decline, and a Hobbesian world of each against the other will collapse civilization. End game.
A Black Swan, such as the 9/11 terrorist attack, presents a low probability, high impact, unnpredictable event out of the blue. Such a disaster might be natural or anthropogenic. Given the deepening condition of overshoot of natural and institutional capacity to adapt, the disasters not yet on the horizon will likely provide a desperate capitalism to seek opportunities to profit from such disasters --- witnesss New York City's armoring of its downtown areas.
Conclusion: the Dynamism and the Limits of Capital
Economics, as depicted here, remains the dismal science. Economists have a saying, "mutatis mutandis": all things change. The ancient Greek philospher Heraclitus said, "You can't step into the same river twice." Capitalism's dynamism and history of producing material, monetized goods and services continues to enjoy widespread popular support. Perhaps as we better understand the challenges and systems dynamics of capitalism, we might be able to regard capitalism as a toolkit providing means toward the ends inherent in a just, sustainable, and climate-benign world for our children and thereafter. But capitalism will not be enough to accomplish such a monumental task. Yet, its growing power and laws of motions must not be ignored.