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How does capitalism end?

The deepest belief of the modern economist is that the economy is a self-stabilizing system. This means that, even if nothing is done, normal rates of employment and production will someday return. Practically all modern economists believe this, often without thinking much about it. (Federal Reserve Chairman Ben Bernanke said it reflexively in a major speech in London in January: “The global economy will recover.” He did not say how he knew.) The difference between conservatives and liberals is over whether policy can usefully speed things up. Conservatives say no, liberals say yes, and on this point Obama’s economists lean left. Hence the priority they gave, in their first days, to the stimulus package.

James K. Galbraith, No Return to Normal

Galbraith clearly places himself in the camp of those who thinks government intervention is required in this crisis. Unlike even the members of Obama’s economic team, however, he places on the table that the current economic crisis may not be self-correcting, at least in the near term.

Recovery, he allows, may not be inevitable for capitalism; and, the Obama team may be working with a false set of assumptions:

Policies are based on models; in a slump, plans for spending depend on a forecast of how deep and long the slump would otherwise be. The program will only be correctly sized if the forecast is accurate. And the forecast depends on the underlying belief. If recovery is not built into the genes of the system, then the forecast will be too optimistic, and the stimulus based on it will be too small.

Beyond the distinction between conservative and liberal economists regarding the usefulness of government intervention to facilitate the return of the economy to a growth path, there is, as implied in Galbraith’s essay, an additional distinction to be made between those who believe the economy is self-stabilizing and those who assert it is not.

egg2We count ourselves among the latter; preferring the view that capitalism is not only not self-stabilizing, but carries the seeds of its own destruction – that it has a built in self-destructive trajectory and a historical conclusion.

Which, when you think about – and we do think about it a lot these days – is pretty fucked up, since capitalism is pretty much the way this society is organized, and remains the vital material context for such things as putting food on the table of millions of working families in this country and every other country on the planet – without exception.

The death of capitalism – far from its favorable treatment in most socialist literature – simply constitutes a potential extinction level event for our species, akin to environmental degradation, and, over a shorter time horizon, somewhat, but, uncomfortably, not too far below the likely impact of a small wayward asteroid.

To get an idea of how profound an upset of society such a death implies, one need look no further than the writings of a guy who first predicted its inevitability.

Karl Marx wrote these words in 1845:

[Capitalist relations] can, of course, only be abolished given two practical premises. For it to become an “intolerable” power, i.e. a power against which men make a revolution, it must necessarily have rendered the great mass of humanity “propertyless,” and produced, at the same time, the contradiction of an existing world of wealth and culture, both of which conditions presuppose a great increase in productive power, a high degree of its development. And, on the other hand, this development of productive forces (which itself implies the actual empirical existence of men in their world-historical, instead of local, being) is an absolutely necessary practical premise because without it want is merely made general, and with destitution the struggle for necessities and all the old filthy business would necessarily be reproduced; and furthermore, because only with this universal development of productive forces is a universal intercourse between men established, which produces in all nations simultaneously the phenomenon of the “propertyless” mass (universal competition), makes each nation dependent on the revolutions of the others, and finally has put world-historical, empirically universal individuals in place of local ones. Without this, (1) communism could only exist as a local event; (2) the forces of intercourse themselves could not have developed as universal, hence intolerable powers: they would have remained home-bred conditions surrounded by superstition; and (3) each extension of intercourse would abolish local communism. Empirically, communism is only possible as the act of the dominant peoples “all at once” and simultaneously, which presupposes the universal development of productive forces and the world intercourse bound up with communism. Moreover, the mass of propertyless workers – the utterly precarious position of labour – power on a mass scale cut off from capital or from even a limited satisfaction and, therefore, no longer merely temporarily deprived of work itself as a secure source of life – presupposes the world market through competition. The proletariat can thus only exist world-historically, just as communism, its activity, can only have a “world-historical” existence. World-historical existence of individuals means existence of individuals which is directly linked up with world history.

(We hope the excerpt did not cause a cerebral embolism in our readers)

From what we can understand of this passage – and, we admit, our understanding is at best faulty and woefully inadequate – Marx conceived of a global economic crisis, involving mass unemployment and extreme want among billions of working families who have been rendered superfluous to the production of material wealth by the development of capitalism itself. This will be a crisis which begins among the most advanced industrial nations, and spreads, through global trade relations, to all nations within a fairly short period of time.

He is, therefore, describing a circumstance where wage work itself has become impossible on a global scale – a situation where mankind as a whole is forcibly ejected from the age of scarcity at once and together.

The Great Depression is highlighted in Galbraith’s essay because it opened a window into this moment of hard to imagine economic circumstances, sending shock waves throughout the most advanced countries, and plunging them into a near catastrophic failure.


According to Irving Fisher, noted economist and a member of Skull & Bones, in his 1933 paper, “The debt-deflation theory of great depressions,” the Great Depression threatened the very fabric of American society:

Had no [government intervention] been applied, we would soon have seen general bankruptcies of the mortgage guarantee companies, savings banks, life insurance companies, railways, municipalities, and states. By that time the Federal Government would probably have be come unable to pay its bills without resort to the printing press, which would itself have been a very belated and unfortunate case of artificial respiration. If even then our rulers should still have insisted on “leaving recovery to nature” and should still have refused to inflate in any way, should vainly have tried to balance the budget and discharge more government employees, to raise taxes, to float, or try to float, more loans, they would soon have ceased to be our rulers. For we would have insolvency of our national government itself, and probably some form of political revolution without waiting for the next legal election. The mid-west farmers had already begun to defy the law.

Interestingly enough, Fisher spoke optimistically in his paper of the country emerging from the depression in 1933, when, in fact, it would last for almost another decade.

And, that indicates why the Great Depression pretty much did not become the event predicted by Karl Marx: As severe and long as it was, it did not come close to the catastrophic collapse of wage work itself – nor did capital become, a power against which men make a revolution…”

Instead, the Great Depression was the starting point for the  fascist (non-pejoratively understood) interventionist model of government directed economic growth policies, which aimed both to curtail the most egregious results of the business cycle, and to manage a (hopefully) permanent economic expansion.

But, by adopting these policies, we think it is safe to say society moved one step closer to that ultimate prediction, for reasons we will turn to next.

To be continued

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