Capitalism was supposed to "lift all boats" and create a society whose residents enjoyed the best of everything -- from consumer goods and services to social and educational programs. And we've been inundated by spin doctors in the media, countless tomes and just about every millionaire about the virtues of the market; its ability to self-regulate and its amazing sense of accomplishments. Now there is absolutely no doubt that the capitalist system is in the grip of perhaps its worst financial crisis ever. And that somber analysis comes from, among other people and institutions, the International Monetary Fund (IMF) - the biased literal referee and regulator of the global capitalist system.
There have been much speculation, Monday morning quarterbacking and hand-wringing about what really happened and what (and who) is to blame for the present global economic and financial crisis. At the top of the list of culprits is unadulterated corporate greed. Sure, human nature being what it is, some enterprising Wall Street individuals seized the opportunity to amass enormous riches in an almost crack-addictive, trough-feeding, financial binge that gives new meaning to the words "morbidly excessive."
The chaotic and seismic convulsions in the credit markets and the international banking system coupled with the ripple effects in stock markets around the world is no accident or fluke of history or something that can be easily self-corrected by the fabled market and its transformative forces. And for the first time in almost 25 years the international ruling political elite have no answers to an endemic problem nor solutions beyond incompetent hit and miss experiments and almost lunatic reassuring platitudes.
The present situation is not the usual cycle of boom and bust that has characterized capitalism for over 100 years. Massive financial fiat money bailouts, gutting of social programs that benefit the poor and middle class, tax breaks for the super rich and the fact that for many people the world is already in a second and far deeper and lingering recession despite the public utterings of politicians and economists is most instructive.
Today, capitalism in America has resulted in a growing super-wealthy class, a smaller and weakened middle class and a huge burdensome population of over 46 million jobless and often homeless poor people. Since the housing bubble of 2007 there has been a drop of 36 percent in the wealth of the median income, whereas the drop in the wealth of the top 1 percent of households has been only 11 percent.
Put in simpler terms: the top 1 percent (the upper ruling class) now owns 34.6 percent of all privately held wealth. The next 19 percent (managers, professionals and small business owners) own 50.5 percent, meaning that only 20 percent of Americans own 85 percent of the wealth in the United States. This leaves just a meager 15 percent of the nation's wealth for the bottom 80 percent of the U.S. population -- the working poor, the wage and salary workers. Such disparities greatly undermine the U.S. democratic system of government. This massive kleptocracy now literally owns governments.
Also inherent in this social contradiction is that capitalism depends on "the army of workers" to work in its factories and produce the commodities and manufactured goods that its corporations need to sell for profit. But with the vast majority of the members of "army of labor" unable to buy the very goods and merchandizes that it produces because of low wages, high unemployment and hopelessness, there should be cause for concern for a capitalistic nation that depends on a consuming public for its income.
To be sure pure capitalism has been responsible for unprecedented growth, innovation and social advancement unparalleled in the world. It has lifted many out of poverty, created the conditions for research and development in medicines, and hitherto placed the unique human potential for pioneering new frontiers at the center of the system. This system thrived and grew by healthy competition between businesses that drove down consumer costs resulting in an improved quality of life for both middle and working class people.
On the other hand, monopoly capitalism is an economic abnormality based on absolute control of large parts of the global marketplace. These mega- companies and international corporations kill healthy competition and fueled by corporate and individual greed strive for more and more super profits. For example, today Walmart is unchallenged as the world's biggest retailer, HSBC, Bank of America and JP Morgan Chase control most of the global financial market. A few hundred companies now control most of the world's resources and dictate prices and commodity availability.
But inherent in any capitalist boom is chronic endemic speculation and the quest for never-ending super profits. Within the context of the present international financial and economic crises is the behavior of the banks. As with the rest of finance capital they were eager to seek out lucrative speculative investments, including those in property. For them, house prices could never fall, so they engaged in reckless lending to people who had little hope of paying back high-risk mortgages. The sub-prime mortgage crisis was therefore nothing more than an exercise in speculative greed. House prices went up as people were buying them. It was a typical bubble. Credit allowed the capitalist system to go beyond its limits.
Today, the modern world is ruled by multinational corporations and governed by a capitalistic ideology that believes: (a) Corporations are a special breed of people, motivated solely by self-interest. (b) Corporations seek to maximize return on capital by leveraging productivity and paying the least possible amount for taxes and labor and (c) Corporate executives pledge allegiance only to their directors and shareholders. The dominant corporate perspective is short term, the current financial quarter, and the dominant corporate ethic is greed, doing whatever it takes to maximize profit.
So departing from its original and noble intents capitalism has failed. The reasons are many and varied but we must start with the essential fact that global corporations are too big. Their size has warped and distorted capitalism as a system for good and progressive human development. We're living in the age of corporate dinosaurs. For example, the largest multinational is JP Morgan Chase with assets of $2 Trillion, 240,000 employees, and offices in 100 countries. Global capitalism needs to be reminded that the original dinosaurs perished because their huge bodies possessed tiny brains. Modern corporations are causing chaos in the world because they are impersonal, anti-competitive, parasitic entities that herd entire peoples, nations and regions into markets in which to dump merchandize and products.
But no matter, the present international crisis is a damning indictment of modern capitalism. Indeed, those who preached the virtues of the free market system had to swallow their words and were forced to turn to the state -- namely tax-payers' money -- to bail them out. All the apologists of capitalism who said profits were a reward for risk-taking are now silent as the state stepped into rescue the system from collapse using the money owned by the very people these modern day robber barons so despise.
Private property and profits are private but debts and failure is a social affair. Put another way when things are going good for the capitalist their profits, bonuses and financial fringe benefits are individual, private and for the sole purpose and use by themselves; but when they run into trouble and the system built on greed and speculation fails they fall back on the once-hated socialism -- their debt and problems become the collective responsible of "we the people." The people's money is used by governments in the pay of this financial oligarchy to bail the system out.
And as if to underscore where the state's priorities lie governments (like the U.S. government) had no money for social welfare or public health, but when needed, they had plenty of money to bail-out Wall Street and the same people that helped create the crisis in the first place. The Bush and Obama bailouts were the most extensive peacetime government intervention in the economy since the Great Depression which shows how dangerous the crisis has become for capitalism.
Since the Reagan era United States and global corporations have followed the path of least resistance to profit; they've swallowed up their competitors and created monopolies, which have produced humongous bureaucracies. In the short-term, scale helps corporations grow profitable, but in the long-term it makes them inflexible and difficult to manage. Gigantism creates a culture where workers are encouraged to take enormous risks in order to create greater profits; it's based upon the notion that the corporation is "too big to fail."