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Capitalism and Its Discontents

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I have been reading lots of alarmist articles about the U.S. and world economies.  This one, by a Spaniard named Pablo Ouziel, which appeared recently at OpEdNews, worries a lot about the apparent lack of control the world economies have, given the two-hundred fifty  kilogram gorilla in the room.  The U.S. economy is clearly leading the world, and perhaps it is now finally headed over the precipice.  It would certainly appear that way to someone embedded in an economy that is tossed around by the tides emanating from Wall St. and Washington.  I think there is a lesson to be had from understanding the perspective of such economies.

The classical critiques of capitalism are by now pretty well understood.  The Marxian analysis of 19th century industrial and financial capitalism was apt and yet, the failure of the "utopian/distopian" implementation of Marxian principles by Lenin and Mao, not to mention the failures of scores of tinpot ideologues in Europe, has obscured the validity of the analysis.  Capitalism, like most human creations, does contain the seeds of its own destruction. The classical analysis resolves down to some fairly simple rules.  Capitalism is a system that generates reinvestment potential by removing value from the marketplace.  How this is accomplished is the source of most of the contentious discussion.  Fundamentally, the value removed is determined by opposing forces impinging on the capitalist—the urge to maximize the withdrawal for reinvestment, but which is curtailed by competition as described by the supply-demand curves.  Eventually, this process results in stagnation or worse because either an equilibrium is reached where competition drives down the marginal reinvestment amount retrieved to a point where it is negligible, or some new event changes the shape and depth of the market, such things as technological advances, raw material discoveries or depletion, inventions, etc. 

Since the late 19th c. government intrusion, foreign investment or divestment, etc., have had an increasingly important effect, although it is important to remember that long before the American revolution early modern capitalism in the Netherlands, Great Britain, and France were strongly affected by government policy.  Clearly these economies were fostered by government activities, and the new Protestant religions were an important factor releasing some of the human energies required. 

In fact, in the modern period the collaboration with government and then the take-over of government by "leading sectors" of the capitalist economy has not only politicized capitalist economics, but has made capitalism hostage to the weaknesses of political systems and processes, among them the perfidy and panic that inhabits stressed electorates and their politicians.  The cri d'coeur from modern Spain is not unlike the anguish experienced by the real estate, housing and home furnishing industries in the gorilla's home economy.  The important factor is the percentage of the overall economy that is affected together with the inertia typical of that sector.  Spain is important and so is the U.S. domestic housing industry, but neither are so focal or so volatile that seasoned financiers are likely to panic.  Oh, and what happens to working folks during these bumps in the road is, of course, no concern to capital.

Still there is need for general caution, principally because of the dodge capitalism has taken recently.  Capitalists finding themselves boxed in by controlled competition (anti-monopoly laws) and saturated customary markets have sought to avoid burdensome rules by shifting their weight to the least restrictive of venues, which at the moment appears to be multi-nationalism—a temporary hideout amid the confusion nation states have in dealing with such entities.  Simultaneously they have sought unconventional markets among developing nations. 

The counterpoint to this movement is the increasing dependence of corporations on governments' direct infusion of liquidity, mainly in the form of contracts and particularly in the military sectors, thus leading the whole economy into what we have been calling since the days of Dwight Eisenhower the "military-industrial complex."  The difference now is that after two generations of out-and-out subscription (addiction) to this concept, a third party has been added—the elected government.  The result is a national economy, and increasingly world economies, that have become dependent on proliferating hostilities, or, as we have been saying for some time, "protracted and permanent war."

My Spanish colleague has only the most tenuous of controls over the militarist gorilla.  He cannot defeat him; he can hardly get his attention long enough to make any difference in his behavior; of course he can join the gorilla for the rush and influx of addictive profit(eering), but he knows that this will be counter-productive in short order.  The best he can do is team up with other nations that believe the addiction to military capitalism is both economically and morally wrong.  They may hope for the discontents within (that's us, folks) to join them and slowly wean the beast from his addiction.

Were this to happen the capitalist model that grew to love militarism would be forced to find another way to keep the system going in the face of the constricted boundedness of a planetary economy.  Without room to expand markets, the other forces within capitalism will bring enormous pressures to bear for changing the shape and depth of existing markets.  The pharmaceutical industry, for example, is presently generating its new shapes and depths with sexual enhancement drugs and has tried, all too successfully, to co-opt the psychiatric establishment into relabeling huge numbers of people as psychologically bent or broken, not to mention the fabrication of afflictions like RLS (restless leg syndrome)!

The capitalist system has rested on the dogma and ideology of free-markets for many years.  We have seen that the truth of modern capitalism is that "free" means "government sponsored, guided, and compelled."  Capitalism as we have known it has reached an end point that we politely call "corporatism."  Capitalism has expanded into and co-opted government.  It did this not innocently, but neither was it a conspiracy.  It was a natural and predictable evolution.  We have seen that since the main purpose of government is to provide security and a stable means for the exchange of goods and services, and that accordingly corporate (and private equity) capitalism have moved into these areas, military capitalist corporations now wag the dog. Whether we the people are able to retrieve the situation and bring finance and industrial capitalism back under control remains to be seen.  The election of 2008 in the United States will tell much of the tale. Don't expect it to happen all at once, and don't expect all Democrats to care! 


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James R. Brett, Ph.D. taught Russian History before (and during) long stint as an academic administrator in faculty research administration. His academic interests are the modern period of Russian History since Peter the Great, Chinese History, (more...)

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