Tag Archives: free market system

Sociologist Wolfgang Streeck asks if Capitalism has a future

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).

Evolution

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?

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President Bush: “I’ve abandoned free market principles to save the free market system”

President Bush in an interview with CNN’s Candy Crowley (broadcast 16 December on Lou Dobb’s Tonight) — Excerpt:

I feel a sense of obligation to my successor to make sure there is not a, you know, a huge economic crisis. Look, we’re in a crisis now. I mean, we’re in a huge recession, but I don’t want to make it even worse and on the other hand, I’m mindful of not putting good money after bad so we’re working through some options.

… I’ve abandoned free market principles to save the free market system. I think when people review what has taken place in the last six months and put it all in one package, they’ll realize how significantly we have moved.

Excerpt from The King Report, 17 December 2008 — “Independent View of the News.”

If one uses the sophistry, “I’ve abandoned free-market principles to save the free-market system”, then one can assume he/she would also ‘abandon democratic or constitutional principles to save the country.’ Solons, trying to prove their decades-old philosophies and salvage their massive egos, have altered the very nature and fabric of the USA with their grandiose interventions and nationalizations. The USA as the founders conceived and ensuing generations believed no longer exists.

A select few solons now exercise an unfathomable concentration of power and control over the US economy and financial system. The major concern is no longer economic or financial; it’s for the return of the USA to its market economy and constitutional roots.

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America is changing. Read some chillling words from a liberal economist

The crash of the post-WWII debt supercycle will ripple out though our society in ways we cannot now imagine.  There are a few who can grasp the trend of events and see what lies ahead. 

Like this article by Brad Delong, economics professor at Berkeley:  “Today in Financial History“, posted at his blog Grasping Reality with both hands, 29 September 2008. I strongly recommend reading this.  It gives a valuable if somewhat long and technical analysis of our situation.  More important are his conclusions, of special significance because the Obama administration will hire either DeLong or others like him.  So his analysis is academic speculation, but not just academic speculation.

He concludes with some chilling words.

Five more notes:

First, last spring Larry Summers had good arguments that we had then set in motion enough policy moves to resolve the crisis and save the world economy from depression. We had implicitly guaranteed the unsecured debt of every large investment bank in the United States. And we had greatly strengthened the implicit guarantee of Fannie and Freddie. That should have been enough. But clearly it wasn’t.

Second, I don’t believe that after this the price of risk will ever again become a free-market price, just as after the Great Depression the short-term price of liquidity–the short term interest rate–ever became a free-market price. The federal government, in one form or another, is going to be in the business of insuring debt securities against steep declines in value. Securities that are not so insured will simply not be traded. What Fannie Mae did for “conforming” home loans, the Treasury or some other government agency will do for derivative securities. It will offer insurance, charge for that insurance, and supervise and oversee financiers much more strictly.

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