Will capitalism end or can it be reformed?

Two new books on capitalism have arrived this month.  The first is by Wolfgang Streeck and called, How will capitalism end?  Wolfgang Streeck is the Emeritus Director of the Max Planck Institute for Social Research in Cologne and Professor of Sociology at the University of Cologne. He is an Honorary Fellow of the Society for the Advancement of Socio-Economics and a member of the Berlin Brandenburg Academy of Sciences as well as the Academia European.  Streeck’s views carry some weight, indeed sufficiently to be reviewed by Martin Wolf in the Financial Times.

Streeck’s thesis, as the title implies, is that capitalism is a system that is going to end and its demise is not so far away. He opens by reprising another book that covered the views of five other social scientists, called Does capitalism have a future? That contains contributions by the likes of Immanuel Wallenstein, Randall Collins, Michael Mann, Georg Derluguian and Craig Calhoun.  As Streeck says, all these scholars agree that capitalism is heading for an ultimate crisis, although each has different reasons why.

Wallenstein reckons that capitalism is at the bottom of a Kondratiev cycle from which it cannot recover (for a multitude of reasons, mainly to do with the decline of the world order under US hegemony).  Craig Calhoun, on the other hand, reckons capitalism will give way to state-directed economies that might restore capitalism but in a new ‘non-market’ form.  Michael Mann reckons also that US hegemony is over and capitalism will become an unpredictable platform for struggle among various capitalist rivals, while working class struggle is splintered.  The only hope is that social-democratic forces of compromise will triumph.  Randall Collins offers the closest to a Marxist perspective, according to Streeck.  Capitalism will increasingly resort to dispensing with human labour and replacing it with robots and AI.  This will create severe class conflict and underconsumption, because most workers will not have enough income to buy the products of robotisation.  Although Collins’ analysis is not Marxist (in my opinion), he does conclude that the only hope is a socialist transformation.  Finally, Derluguian argues that the demise and collapse of the Soviet Union suggests that capitalism will not give way to socialism, but instead to a post-capitalist fragmentation.

After this account, where does Streeck stand?  He thinks that capitalism will die “from a thousand cuts” and will not be saved by Mann and Calhoun’s alternatives.  With no proletariat as a force for taking society forward under socialism, capitalism will collapse under “its own contradictions” to be followed, not by socialism, but by “a lasting interregnum”, a “prolonged period of entropy” where ‘collectivism’ does not emerge but instead there is a disparate ‘individualism’.

Streeck’s account of the current state of capitalism follows in the book and provides an excellent narrative, particularly his critique of Keynesian and reformist responses (although chapters are somewhat repetitive).  He sees a systemic disorder revealed by first, rising inequality (where the top 400 taxpayers in the US get over 10,000 times more income than the bottom 90% and the top 100 American households have 100 times more wealth!).  Then there is the rife corruption by the rich and powerful, as exhibited in the role of the banks.  And the growing power of finance capital, a totally unproductive and damaging sector of capitalism.

All this has been described by many, including by me in this blog.  But Streeck sees these forces as the ones that will end capitalism, rather than as part of reoccurring crises of slumps in capitalist production.  Capitalism is more unfair and corrupt than incapable of meeting people’s needs.   But because there is no positive force in society that can replace capital, capitalism “will go to hell but for the foreseeable future will hang in limbo, dead or about to die from an overdose of itself.”

For Streeck, it is a “Marxist prejudice that capitalism as an historical epoch will end only when a new or better society is in sight and a revolutionary subject ready to implement it for the advancement of mankind”.  In a way, Streeck predicts a new stage of barbarism after capitalism collapses, similar to what happened to the Roman Empire after its collapse in the 5th century.  Then a sophisticated slave-owning economy gave way to tribal states; cities gave way to small villages; landed estates gave way to small groups; technology was left idle and forgotten.

In my view, Marx did and would recognise that barbarism could supersede capitalism.  There is no guarantee that capitalism is followed by socialism. He would also argue that without a “revolutionary subject” (i.e. the working class) carrying through political action to end the capitalist mode of production, it can stagger on.  Streeck’s is right that capitalism has no long-term future, but is he right that there is nothing to replace it to take human society forward?

Streeck’s view is the cynicism of the academic divorced from the working class and seeped in the experience of the reactionary neo-liberal period (a very short time in human existence and capitalism).  In my view, the (Kondratiev and profit) cycles of capitalism will eventually create new forces for change – a new more confident working class as the agent for change.  But if not, … then.

Naturally, Martin Wolf’s critique of Streeck is different, coming as it does as a defender of capitalism.  Sure, says Wolf, Streeck is right that no stable equilibrium exists in any society. “Both the economy and the polity must adapt and change.”  But only a market economy can deliver “democracy”.  The danger now is not the end of capitalism but the end of democracy.  So Wolf says, that democratic governments must cooperate to ensure that they “manage the tensions between the democratic nation state and the market economy”“Is the task possible?, Wolf asks and answers “Absolutely, yes” – although he does not really say how.

This optimism and wishful thinking of ‘social-democratic’ solutions to capitalism’s ills remains dominant in leftist media.  It is again revealed in another new book by Dean Baker.  Baker is co-director of the American Center for Economic Policy Research in Washington and a regular broadcaster and writer on economics and economic policy, often speaking at labour movement meetings and writing for the likes of the Guardian newspaper in the UK.  Baker was one of those few economists cited as forecasting the global financial collapse, basing his view on the credit-fuelled housing bubble in America, creating financial instability a la Minsky.

His latest book is Rigged: how globalisation and the rules of the modern economy were structured to make the rich richer (the book is available in pdf here rigged).  The title has now become a familiar theme among leftist, (post?) Keynesian economists.  Namely, it is not capitalism or the market economy that is the problem, but the way the modern economy is structured, particularly since in the neo-liberal period after the 1980s, i.e. rigged to change ‘the rules of the game’ in favour of the rich and away from the majority.  This is the theme presented to us by Joseph Stiglitz, that other economist and hero of the left and the labour movement, in his latest book.

Baker shows how the distribution of income in our society has little to do with merit and how the postulates of neoclassical economics are selectively invoked to prevent any actions that do not benefit elites. Interventions that promote upward distribution of incomes are never criticized, while inequality and unemployment are left for the invisible hand to fix.

Baker points out that “neither God nor nature hands us a worked-out set of rules determining the way property relations are defined, contracts are enforced, or macroeconomic policy is implemented. These matters are determined by policy choices.”  In the modern economy, banks are bailed out in crises but people are not.  Trade deals are imposed that lead to the loss of jobs for the majority but more profit for corporations.  Full employment could be achieved but it is against the interest of the big corporations because it would mean rising wages and labour costs that squeeze profits.  So what Marx called “a reserve army of labour” is maintained as a matter of policy.

He identifies five areas in which the “upward distribution” induced by policies should be reversed: macroeconomics that focus on low inflation only; asymmetric treatment of privatized gains and socialized losses in the finance industry; heavy protection of patent rights at home and abroad; protection of high-skill occupations from foreign competition; and out-of-bounds CEO pay.

Baker says this policy ‘rigging’ of the economy shows that the ‘free market’ does not operate.  Here he seems to be implying that, if it did, then all would be well and fair.  Because the market is ‘rigged’, not because a market economy exists, we need government to intervene to correct inequalities, injustices and apply policies for the majority not for the few.

Baker fails to explain how the market got ‘rigged’.  Did this just happen? Why was the policy choice for the rich not the majority?  Was it not ever thus?  Baker is looking at the symptoms not the causes.

Marxists like me would say the policies that led to rising inequality and the growth of finance capital came about because the Golden Age of capitalism, with its decent pensions, public services and benefits and full employment, could no longer be afforded by market capitalism as profitability of capital plunged.  So the ‘rigging of the rules’ was necessary for the saving of the capitalist market system.

Extreme inequality of wealth and income has always been the norm for capitalism, not just a product of the ‘modern economy’.  It was the short Golden Age after 1945 that was special, not the neoliberal period since the 1970s.  If that is right, then Bakers’ demand that ‘progressive governments’ intervene to create a level playing field and end ‘upward distribution’’ is just wishful thinking.  The social democratic compromise of the 1960s is not going to return in the capitalism of the 21st century.  Streeck is closer to the truth than Baker.

18 thoughts on “Will capitalism end or can it be reformed?

  1. No one here deals with the historical contradiction between new productive powers and capital accumulation. One author is said to examine it with from the view of underconsumption theory. The profit rate theorists explain something endemic in capitalism which has broken out in crises since the beginning of the industrial phase. The barrier has been reached.

  2. These books, and this commentary, show precisely zero understanding of the contemporary crisis that is forcing a speedy end to the capitalist mode of production. The capitalist mode of production, an epoch in the phase of human evolution that began with the substitution of production (agriculture, domestication of cattle etc,) for the mode of subsistence of an omniverous hunter-gatherer species some ten thousand years ago. Each successive mode of production has represented an increasing use of the planet’s resources by a constantly rising human population. The capitalist mode of production, by systematic destructive extraction of the planet’s reserves of water and energy and living beings and fertile soil to support that now-explosively-rising population, has reached its ultimate crisis, its inability to continue, let alone expand, that destructive extraction even as the population to be supported by such production continues to expand. For any natural species–most emphatically including the human species–expansion of population beyond resource base means only one thing–the massive die-off of a population crash. The rising temperature of the whole planet is a clear process leading directly and imminently (within three generations at most) to such a catastrophe. The word “barbarism,” threatening as it does the return to one of our prior modes of production, is totally misleading and inaccurate as a description of the ecological catastrophe awaiting us. And “socialism,” implying as it does the substitution of a *more* “productive” social order, suggests (see the mad extractivism inherent in the “21st-century socialism” of Chavez, Correa, and their rapidly diminishing number of acolytes) only a continuation of the race toward population crash. The only hope for our species (in the evolutionarily-near term) is the elimination of the extractivist (capitalist) mode of production and the formation of a new, decentralized, mode of small-scale production based entirely on free renewable energy (of which our planet receives virtually unlimited quantities from the neighboring cosmos) and harmonious sustainable interaction within the entire environmental life of the planet. And since we are, alas, still firmly under the capital;ist mode of production, the first steps within that mode can *only* be a fiscal (taxation) policy making, in the nearest future, resource extraction so absolutely unprofitable that capitalist firms are *forced* by the logic of a market economy to turn to renewable-energy based production on a planetary scale. Anything less is not only futile but a contribution to the developing catastrophe.

    1. I largely agree that MR (and possibly the writers reviewed) does not take the environmental question seriously enough (and I disagree with his neo-orthodox Marxian view of history as a set of stages in which working class struggle and economic ‘progress’ will eventually result in the transition to socialism). However, it is incorrect to state that barbarism is a (prior) mode of production: in Marxist use it is a state of degeneration, civilisational collapse (e.g. see Rosa Luxemburg and Karl Kautsky (not Engels as Luxemburg wrote):

      “Friedrich Engels once said: ‘Bourgeois society stands at the crossroads, either transition to socialism or regression into barbarism.’ … Until now, we have all probably read and repeated these words thoughtlessly, without suspecting their fearsome seriousness. … Today, we face the choice exactly as Friedrich Engels foresaw it a generation ago: either the triumph of imperialism and the collapse of all civilization as in ancient Rome, depopulation, desolation, degeneration – a great cemetery. Or the victory of socialism, that means the conscious active struggle of the international proletariat against imperialism and its method of war.” (Luxemburg)

      In the longer run though perhaps we shouldn’t be too pessimistic – maybe there will be a period that is barbaric but (if we as a species survive) as Virgens Kamikaze points out the collapse of the Roman Empire eventually led into feudalism and, contrary to popular opinion, that in many ways represented an improvement for the majority of human beings (and maybe environmentally too!). Contra MR I think socialism can – and will – gradually emerge out of struggle and collapse – not the onward march of (technological) progress.

      1. I take the environmental thing very seriously. See my posts on climate change and my book, The Long depression. I agree with your way of posing the issue of barbarism and the rise of feudalism.

  3. “cycles of capitalism will eventually create new forces for change – a new more confident working class as the agent for change”

    Unfortunately I can’t see any sign of a proper “subject” in the making, and I guess MR would agree that some signals of its existence should be visible by now. Then it should be considered as a regional thing, transatlantic at its largest. A global revolutionary (I would prefer a “transformative”) subject is unthinkable. Even then there is no proper intellectual organization to bring fundamental changes forward. Read Neil Harding’s “Leninism”.

  4. Marx never stated socialism was a given. In fact, in the economic manuscripts of 1861-63, when analysing Rossi, he calls capitalism for what it is: accidental.

    Rossi stated that, although capitalism was a given, wage labour was an accident, i.e. that capitalism doesn’t need wage labour to exist.

    Marx replied, stating that, although it’s true that wage labour is an accidental form of human labour (which is eternal, part of human nature), then, if it’s true, so is capital. In this part, the term “accidental” is interchangeable with “historically specific” or simply “historical”.

    Socialism and barbarism are as accidental as was capitalism during feudal times, in the sense that luck (in the sense of destiny) plays a huge role in humanity’s history.

    Streeck is also wrong when he compared today’s capitalism with the fall of Western Rome: Europe actually flourished with the rise of feudalism. Its population boomed.

    The ancient system was plagued with low population growth because the Roman slave and colonisation system tended to suffer periodical famine, due to the particularities of its agricultural system vis-à-vis the slavery system. Feudalism solved this problem with manorialism, open field system.

    The stereotype of feudalism as a system that suffered periodic plagues, famine, mass extinctions and chaos comes from late feudalism. While it’s true feudalism depended on a constant state of warfare to survive, it didn’t set off the benefits from the ancient system (which also depended on constant wars to survive, to an even greater extent than feudalism).

    1. The statement “wage labour is an accidental form of human labour (which is eternal, part of human nature)” Is not quite accurate because it obscures the quintessential distinction between *work* (necessary activity directed toward immediate survival needs, which is eternal, part of the nature of all animals including human ones) and *labour*, involving the self-alienation of the human body and mind into an instrument utilizable for objectives separated in time and space from the working animal. Wage labor is distinguished from other alienated forms of work by the extreme degree of its alienation to the benefit of humans entirely separated and antagonistic to the actual worker.

    2. It seems we are back to the debates between Marx and the Utopians and Idealists, namely that capitalism could be bypassed because it was a mere accident of history. In fact, the line of march of Marx’s whole thesis is that capitalism was an unavoidable, therefore inevitable stage in the transformation of the forces of production. What he did not say is that socialism was inevitable. Unlike capitalism which grows in the womb of feudalism, socialism is a conscious construction. All that capitalism provides is its material foundations – developed means of production and the modern proletariat – and the imperative to do this because capitalism is prone to crises.

  5. The working class remains the potential bearer of a new society. It will remain largely unaware of that until the final moments of capitalism. The organisation of a minority revolutionary party is the necessary precondition for generalised class consciousness and rather than calling for nationalisation under the capitalist state, we need to accept the Marxist solution of the dictatorship of the proletariat as the requirement for initiating the transition from capitalism. The Communist Workers’ Organisation, UK affiliate of the Internationalist Tendency rejects all socialdemocratic initiatives for resolving the crisis, such as nationalisation, outside of the revolutionary overthrow of capitalism and the abolition of wage labour and money. There is no socialist role for the existing capitalist state. See http://www.leftcom.org

  6. As I’ve said here before we are seeing the proof of Ernest Mandel’s position that there is no automatic upturn from a long depressionary wave. What could bring about an upturn, besides war? Asteroid mining? Actually I think nationalizing finance and funding a major roll out of renewable energy and the internet of things could do it. Ken Macleod calls it the Big Deal in his novel Descent and like some science fiction ideas it could work I think. Then again it may just stay fiction.

  7. Mike writes: “Marxists like me would say the policies that led to rising inequality and the growth of finance capital came about because the Golden Age of capitalism, with its decent pensions, public services and benefits and full employment, could no longer be afforded by market capitalism as profitability of capital plunged.”

    Affording the Welfare State was never the issue. The Welfare State was brought in and flourished because the bourgeoisie was scared to death of an armed, war-hardened working class rising up against them and throwing them and their capitalist system out of the window.

    It was a question of concessions to an angry working class to ensure survival.

    After ww2 the issue of colonialist oppression was solved with much less dexterity – the usual routine there was brutal last-ditch defence of an imperialist state’s own colonial interests (Britain in Kenya or Malaya, say) with maybe some tut-tutting about the rapacity of other imperialist states (with an eye to taking over their exploitation) as in the Suez crisis. Maybe Indian independence was a kind of Welfare State concession on a grand scale – granting the Indian (subcontinental) bourgeoisie and landowners a sort of glorified franchise status to keep them away from socialist abolition of capitalism and hopefully under the paternalistic tutelage of the colonialist banks and big capital.

    Conceding South Asia made it possible for Britain to conduct full-scale wars against humanity in its remaining colonies in Africa and Asia. The question of affording such a policy only came into this in as far as the continued subjugation of India would have gutted Britain and made its further colonialism unworkable.

    As soon as the class-collaborationist anti-working-class leaderships of the unions and the labour parties in the welfare states had sufficiently disarmed the working class politically and helped put it in a strait-jacket, the bourgeoisie reasserted its will to complete domination and exploitation – everything, now! – and under Thatcher and Reagan launched the great neo-liberal offensive against the working conditions and living standards of the working class. They clawed back the concessions and transferred the money that had been spent on better wages and the universal social provision of health and education etc to profits.

    So, it’s clear that profits benefited from dismantling the Welfare State, but that’s not the same as claiming that the Welfare State was introduced because the bourgeoisie was somehow afflicted by a fit of generosity and felt it could afford it. An angry and dissatisfied working class (sound familiar?) was thrown sops because a) it was armed and war-hardened, and b) the Soviet Union and other countries showed that a non-capitalist alternative existed, and the bourgeoisie (and its Quisling labour collaborators) had no interest in the working class developing any curiosity or enthusiasm in that direction.

    The capitalists will “afford” whatever is necessary for their survival, even if this impacts on their profits. Their hope is that the expense will be temporary and can be recovered in due course – as has been the case with the Welfare State and its protracted slow-motion demolition.

  8. Choppa, there is much in your analysis I like. There were various reasons for the welfare state and affordibility was a factor. Postwar another round of accumulation with healthy profit rates could occur. A future proletarian threat will not be bought off by a capitalism gasping for profit.
    But I was disappointed by the inability to recognise Stalinism as a capitalist variant, as I am by MR ‘s prescriptions for virtuous banks serving the people and other measures falling short of the smashing of the capitalist state and the rule of the workers’ councils, despite an excellent analysis of capitalism’s crisis mechanism based on the tendential falling profit rate and defense of Marx in that regard.

  9. When feudalism failed to fulfill increased material demand of society, technical advancement became necessary for productive forces to capitalist production. Capitalism came as a progressive force concealed with antagonism. It came at certain time and space due to a certain condition. Similarly, it will be replaced at a certain time, space and condition when it will be incapable to fulfill arisen newer demand.
    The replacement will not be a barbarism nor an anarchy or chaos but no other than socialism, as its precursor is a productive force, which has already acquired the capacity by past success and failure and became conscious of leading.

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