Tuesday, January 31, 2017

Can Capitalism End?

There are people who would proclaim 'End of Capitalism' as each new crisis breaks, only to be proved wrong. Just as Marx did in his time, they see this end coming in every war or revolution, and indeed, in big and small financial crisis - from great depressions to currency crisis to stock market crashes. They see germination of an alternative from the triumph of socialist agenda in Vietnam or Venezuela, or a general apocalypse in climate change or a Russian face-off. In short, they seem to expect a definitive, episodic end of capitalism.

But nothing yet has come of it. 'Capitalism', the beast these thinkers aspired of killing, has only come back stronger, proving its resilience through defying the odds. Stock markets that went down went up eventually, financial crisis dissolved into stability, revolutionary regimes decayed into business as usual and the apocalypse failed to arrive. Ironically, as it defied misplaced expectations of its demise, it seemed Capitalism can not end.

However, it is perhaps worthwhile asking whether a system like Capitalism can indeed have a definitive end. And, if it is its detractors created such an expectation, they have also allowed 'capitalism' to be defined in most diffused of ways - in terms of market exchanges, private property and pursuit of self-advancement. Such common concepts and desires, ingrained in our language stretching all through known history, make capitalism appear perennial and its end, an idea without precedence. And, both in capitalism defined in terms of some of the commonest markers of everyday life and the revolutionary expectation of a dramatic end lies the impossibility of such an end.

And, yet, there are reasons to believe that our economic systems need changing. It is strange that such admissions are most pronounced within what we would call the 'capitalist' literature, talks of business gurus and strategy firms. Disruption, Revolution and Paradigm Shift are in common use, and investors and entrepreneurs fully embrace those ideas. They talk about obsolescence of industrial age ideas and look for new ones. Read closely and you will know that there is an admission that Capitalism isn't working, only because, as some of the proponents of the new view believes, what we have is not the 'real capitalism'. The advocates of 'real capitalism' mourn the complicated politics of regulation and welfare, all the democratic rhetoric that goes with it, as it reigns in the 'animal spirits', a free-for-all world where nothing except the rights to maximise returns on privately owned capital would be sacred. This is indeed inherently unsustainable, as one starts stripping away the laws made over last hundreds of years, it automatically strips away the legitimacy of any property rights that exist - going back to the 'state of nature' comes with acknowledging land and other property actually belongs to no one!

But this question of 'real capitalism', rather than indicating the strength of the system, signal what the 'end of capitalism' debate misses. First, that Capitalism as we know it is a cultural rather than an economic system. Second, the cultural systems fade, rather than being thrown out like a political regime, overnight. And, third and finally, cultural systems fade when its foundations, built around relationships, economic and social, become unstable.

This 'fading of', rather than 'ending', should let us see what is in trouble. To start with, democracy is in serious trouble, both because the advocates of 'real capitalism' believes that it is coming in the way of profits and responsible for the fall in the rates of profit (which is spreading worldwide), and the middle class supporters of democracy believes that it is not delivering growth and leaning too much on to new claimants rising from poverty. One could see Capitalism as an economic system and democracy as a political system, but they are one and the same in the cultural schema of Capitalism. The key difference between feudalism and capitalism is the question of agency: We must vote ourselves into being exploited! Treating democracy as merely a political system - to be abandoned when it becomes cumbersome - undermines the cultural system of capitalism. 

Then, the foundations of Capitalist production - consumption through credit creation on the demand side and participation through labour on the supply side - are also becoming shaky. These are two sides of the same phenomenon: The rise of the machines! The quest for higher rates of profit are driving automation, and exclusion of labour, which, in turn, not only limiting the ability to consume and play a part, through pledging of future labour, in credit creation, but also limiting the number of people participating in production. This undermines the all-encompassing culture of capitalism, through economic exclusion of a lot of people.

The political and the economic exclusions reinforce one another. Indeed, a fashionable idea today is to provide everyone a basic income. Outlandish as it may sound - this may be as far from 'real capitalism' one could get - this provides an interesting insight how cultural systems fade away, and therefore, worth exploring. The Universal Basic Income provides everyone an income, and resolve the existential crisis of consumption and credit creation on the demand side. However, while it is supposed to be designed for preservation of the current system, it is easy to see how it undermines the cultural system of Capitalism. The debate - who will pay for an Universal Basic Income - has one clear answer: The machines!  There are many ways of paying for this, but one could be done with the least amount of disruption. All countries allow a more lenient treatment of the income from capital, dividends, than the income of labour, wage, as it is assumed that capital investment creates jobs. However, they don't - not anymore - as more and more capital is invested into automation and replacing workers in search of greater profits. So, the most commonsense way to do this is to tax dividends as one taxes the wages - no exemptions - and one can find a way to fund an universal basic income. Of course, in reality, the Governments are set to do just the opposite: The conversation is to LOWER corporate taxes and LOWER welfare, despite all the evidence of technological unemployment. This is indeed what the 'real capitalism' advocates want, but this is also precisely the kind of thing that exclude a lot of people, and weaken the cultural consensus of Capitalism.

Remember how feudalism ended? One could say it did not end at all - as feudal relationships still persist - but it did not end through the storming of Bastille or the Winter Palace. Rather, it just fell out of favour, became an inconvenient way of ruling and managing the state and conducting the conversations. The most feudal of the great powers, the Habsburg Austria, literally committed suicide in search of 'real' vainglory. And, such will be the end of time for Capitalism, as its most ardent preachers and true believers unleash its 'real' form stripped of the cultural trappings, and discover the illusion of its being.


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