Summary: The pace of change has accelerated since Y2k so that it’s difficult to see what’s happening. Here’s a provocative essay by sociologist Wolfgang Streeck describing an evolution almost too large for us to see as it happens — the decline of capitalism (and, though he does not discuss this, its evolution into something else).
Thou know’st ’tis common;
all that lives must die,
Passing through nature to eternity.
— Queen Gertrude to Hamlet in Act I, scene 2.
Excerpt from “On the dismal future of capitalism“
By Wolfgang Streeck
Socio-Economic Review, January 2016
The writing is on the wall, and has been for some time; we must only learn to read it. The message is: capitalism is a historical social formation; it has not just a beginning but also an end. Three trends have run in parallel since the 1970s, throughout the family of rich capitalist democracies: declining growth, rising inequality of income and wealth and rising debt — public, private and total. Today the three seem to have become mutually reinforcing: low growth contributes to inequality by intensifying distributional conflict; inequality dampens growth by curbing effective demand; high levels of existing debt clog credit markets and increase the risk of financial crises; an overgrown financial sector both results from and adds to economic inequality etc.
Already the last growth cycle before 2008 was more fake than real and post-2008 recovery remains anaemic at best, also because Keynesian stimulus, monetary or fiscal, fails to work in the face of unprecedented amounts of accumulated debt.
Note that we are talking about long-term trends, not just a momentary unfortunate coincidence, and indeed about global trends, affecting the capitalist system as a whole and as such. Nothing is in sight that seems only nearly powerful enough to break the three trends, deeply engrained and densely intertwined as they have become.
… State-administered capitalism has failed — that is, was rejected by the owners of capital as too costly for them, to be replaced with free-market capitalism, which has also failed. For the time being, central banks act as regents waiting for a new ruler. But who would this be, and what would be his recipe for holding the capitalist enterprise together?
I suggest that after more than 200 years, capitalism has become unsustainable as a result of having become ungovernable. Behind this is what has come to be summarily called ‘globalization’: the expansion of capitalist market relations beyond the reach of government, uniting capitalism while leaving collective political action fragmented. Although this may look like the final victory of capitalism, which to an extent it is, it also and at the same time foreshadows its demise.
Unlike what Mandeville promised in his Fable of the Bees (1714), and what Adam Smith suggested with his less provocative metaphor of the ‘invisible hand’ (1776), the capitalist conversion of private vices into public virtues underwriting a stable society worked only in the presence of strong formal and informal institutions restraining the market’s ‘order of egoism’ (Setting the People Free by John Dunn, 2005) and subjecting it to social discipline. By out-growing the collective capacities to govern it, that is to say, capitalism has won a Pyrrhic victory.
That there is today no alternative to it, no globally united anti-capitalist force, is as much a predicament for capitalism as it is a blessing. Note that in crucial moments in capitalism’s history, it was its opposition that stabilized it as a society: regional, national or religious movements preserving social cohesion and thereby enabling cooperation and exchange in good faith, or trade unions and social-democratic welfare states securing sufficient demand and social reproduction through political intervention.
The simultaneous disappearance of government and opposition in contemporary capitalism makes for a cumulative breakdown of system integration which, in turn, is driving an accelerating transformation of social integration (Lockwood, 1964). Global ungovernability has caused a deep erosion of social regimes on the frontlines between capitalist markets and what Karl Polanyi has called the three ‘fictitious commodities’, labour, land and money. While capitalist development, according to Polanyi, must ultimately aim to commodify everything, it can proceed only as long as it is prevented by society from forcing under its logic what it can fully commodify only at its own detriment. Protecting labour, land and money from the dynamics of capitalist development requires government; ‘governance’ is not enough (Offe, 2008) to keep capitalism from going too far and thereby undermining itself.
… In a previous article (Streeck, 2014), I have identified five disorders of contemporary capitalism that I consider beyond repair, each of them standing for a different aspect of system disintegration:
- secular stagnation, which is the culmination of the long decline in growth rates;
- oligarchic neo-feudalism, merging political and economic power not just in Russia, Ukraine and China but also in the West, particularly in the USA, and de-coupling the fate of the rich from that of the poor;
- the plundering of the public economy, which had once been both an indispensable counterweight and a supportive infrastructure to capitalism, through fiscal consolidation and the privatization of public services (The end of the experiment?: From competition to the foundational economy by Andrew Bowman et al., 2014);
- systemic de-moralization; and
- international anarchy.
—————————– End excerpt. Read the full article here. —————————–
Larry Summers sees the decay
“If you go back and you study the economy prior to the crisis, there is something a little bit odd. Many people believe that monetary policy was too easy. Everybody agrees that there was a vast amount of imprudent lending going on. Almost everybody believes that wealth, as it was experienced by households, was in excess of its reality: too much easy money, too much borrowing, too much wealth. Was there a great boom? Capacity utilization wasn’t under any great pressure. Unemployment wasn’t at any remarkably low level. Inflation was entirely quiescent. So, somehow, even a great bubble wasn’t enough to produce any excess in aggregate demand.”
— Excerpt from speech by Larry Summers, “chief mechanic of the American capital accumulation machine”, at the IMF Economic Forum in November, 2013. He is President Emeritus at Harvard and served as Secretary of the Treasury for Clinton and Director of the National Economic Council for Obama.
About the author
Wolfgang Streeck is sociologist and director emeritus at the Max Planck Institute for the Study of Societies in Cologne. See his c.v. and publications, his website and his Wikipedia entry. Also see these essays…
- “The Politics of Public Debt: Neoliberalism, Capitalist Development, and the Restructuring of the State“, July 2013.
- “States and Markets“, ASA Economic Sociology Section Newsletter, Fall 2015 — About the perennial debate in economic sociology about the relationship between the state and economy.
- “Politics in the interregnum“, ROAR Magazine, 23 December 2015 — Why capitalism and democracy are in conflict.
- “Social Democracy’s Last Rounds“, Jacobin, 25 February 2016 — “The trajectory of democratic capitalism in Europe … prioritizes the imperatives of the market and of business profitability over the requirements of democratic equality and social solidarity.”
For More Information
If you liked this post, like us on Facebook and follow us on Twitter. See all posts about secular stagnation, about inequality & social mobility, about the new industrial revolution, about Reforming America: steps to new politics — and especially these…
- President Bush: “I’ve abandoned free market principles to save the free market system”.
- America is changing. Read some chillling words from a liberal economist.
- Stanislav Mishin sees “American capitalism gone with a whimper”.
- The Fed sees years of slowing growth. Prepare for years of political turmoil.
The pyramid of capitalism
From the IWW’s newspaper, the Industrial Worker, in 1911. Click to enlarge.