The End of Capitalism? Not quite, but nearly....

But this changed with the worldwide brokering of the New Capital Accord in 2000 by the Bank for International Settlements. The Accord effectively allowed banks to obtain unlimited leverage – the ability to create debt-money at any multiple whatsoever, with no meaningful regulation. Financial institutions exploited this new found power to subjugate the population to an enlarging and unrepayable debt that was the basis of self-multiplying profits for financial institutions.

According to the Bank for International Settlements, by late 2008 total derivatives trades exceeded one quadrillion dollars, that is, 1,000 trillion dollars. This is an insane quantity that has no relation to the real economy - the total GDP of all the countries in the world is only about 60 trillion dollars. It is a quantity generated by the creation of money out of nothing as credit – that is as debt-money requiring repayment on interest.

Worse, no one, not even in the leading financial institutions, really understood exactly how this situation had come about. As of 2004, for instance, 90 per cent of financial transactions in the US were not properly recorded. This was, in effect, a giant, globalized casino through which financiers generated stupendous profits out of thin air, all on the basis of the proliferation of massive debts that inherently could never be repaid. This ‘house of cards’ was therefore uniquely vulnerable to collapse. The housing crisis was just the trigger, threatening to unravel the entire edifice of debt-driven profiteering.

Tackling the “Triple Crunch”

Ultimately, the global financial crisis of 2008 signifies the deep-seated failure of our conventional socio-economic, ethical and political models. But the ‘credit crunch’ is only one face of global crisis. We also face two other interrelated major ‘crunches’ this century – 1) oil and energy depletion, with evidence that world oil production already peaked in 2006; and 2) dangerous global warming, with evidence that current rates of increase of fossil fuel emissions will lead to a rise of 2-4 degrees Celsius, permanently disrupting Earth’s ecosystems.

The mantra that ‘there is no alternative’ is untenable: neoliberal capitalism encourages forms of unthinking consumerism and unrestrained corporate empowerment that are together destroying the Earth’s ecosystems and depleting our energy resources beyond repair. The unprecedented convergence of global economic, ecological and energy crises threatens the viability of industrial civilization, and proves the urgency of immediate social structural reforms.

Such reforms will have to deal with the following structural features of the current global system, among many others:

1)  Global inequalities in ownership of productive resources: Currently around 5 per cent of the world population owns the world’s productive resources. The rest of the population are separated from the means of production, and are forced into various forms of wage labour or servitude to survive. This requires extensive new thinking on how to increase access to, and ownership of, productive resources on the part of the majority of the world population, while respecting individual liberties and private enterprise.

2) The ideal of unlimited growth: As Nobel Prize-winning economist Amartya Sen argues, economic development should be directed not at unlimited growth for its own sake, but at sustainable growth specifically for the purpose of catering for the needs and well-being of the majority of people. The IMF’s own data proves that neoliberal capitalism has led to increasing concentrations of ever-larger profits among a smaller minority of the world’s population, with the percentage of benefits from growth to the poor shrinking, creating greater poverty and inequality all round.

3) Fractional reserve banking and the New Capital Accord (2000): The interest-based monetary system subjugates the real economy to a form of unrestrained financial plunder that intensifies debt in order to grow. This means not only monetary reform, but a fundamental decentralization of the economic and financial system based on the principle that the Earth’s resources belong to everyone, and that people everywhere should participate in economic and financial policymaking. This, of course, also means that political power must be increasingly distributed among communities.

4) Materialist fundamentalism: Underlying neoliberal capitalism are philosophical assumptions about life and human nature that reduce the world to nothing more than a collection of physical, disconnected, atomistic, self-interested and thus inherently conflictual units. This reductionist worldview rationalizes unlimited consumption based on the equation of personal happiness with accumulation of material possessions and fulfillment of material desires. There is no room for objective ethical values because such values cannot be readily identified as material objects. Yet clearly these ideological assumptions of capitalism are false – because if they were right, then they would work! Rather, we see that the manifestation of materialism in the global political economy is leading to massive destruction of life, rather than prosperity for all. This means that ideals like social justice and compassion are actually, objectively, more in tune with nature than neoliberals would have us believe.

Civilizational Renewal?

The urgent need for a global alternative is therefore not up for debate. But we should hold no illusions. Things will get far, far worse, before they get better. This is not yet the end of capitalism. On the contrary, the biggest financial players, like Goldman Sachs, JP Morgan, and others, have used their power over states to secure massive bailouts using public funds, allowing them to prevail while hundreds of other financial institutions have fallen like dominos. As the collapse of the financial system pulls down the real economy, shares in giant corporations which actually produce tangible goods and services have plummeted as consumers are clinging to their increasingly empty wallets. Taking advantage of their supreme position, financiers have moved in fast, buying up the cheaper shares and consolidating ownership of production. We are witnessing an unprecedented re-structuring and centralization of economic and financial power.

Yet the system has perhaps another 10-15 years before irreversible collapse as the impact of peak oil kicks in. In this time-frame, as working people are increasingly upset, confused and angry about the acceleration of socio-economic injustice, activists and researchers have unprecedented opportunity to work harder than ever to develop a vision for the future that is just, inclusive and holistic. The time to prove that there are meaningful alternatives is now.

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