The End of Capitalism: What Post Capitalism Could Look Like
Present Capitalism Has Become Unsustainable
Capitalism was necessary to the human evolutionary process. However, just like its parents, father feudalism and mother church, Capitalism is approaching its next generation off-spring. It can retire to the porch of history and watch the world transition to a new paradigm. Wage labor cannot sustain it anymore. Capitalists have become increasingly, simple 'rent seekers', rent seeking is a behavior not based in production and trade of goods and services, it's based purely on the financial sector using the government's monetary policy mechanism to enhance the value of their financial assets, most times intangible paper. The public good suffers immensely, because, the greater public's collective wealth is siphoned upward by rent seeking.
Wall Street is a prime example of this.
Economist L. Randall Wray writes :
"William Lazonick, an expert on the history of the American business corporation, points out that the U.S has enjoyed, over its history, an extremely productive economy. We still have important productive assets, but we’re now taking money out of our productive economy instead of investing in it. The shift has happened over time, but the mechanisms of extraction have become dangerously efficient. A giant financial sector and wealthy class are sucking money, vampire-like, out of the productive sector, where the goods, technologies and services that we want are created."
The engine of American/western capitalist production and innovation is being neglected while Wall Street financial operatives move funds around that simply siphon off dividends, rents, for themselves. American capitalism has become a closed system, looping back its major benefits to those inside its bubble. Those outside are scrambling for relative scraps and crumbs.
Sixty years ago the motivating idea was to grow the business through investing in labor and production capacity. Today the major activity is to extract value from the business, through slashing labor costs and outsourcing production capacity. Selling off huge chunks of an enterprise to help it look lean on Wall Street. While Main Street suffers. That is why we keep hearing about a strong economic recovery, while the majority of people are not experiencing it.
Supply-side economics, better known as; trickle-down.
, Ph.D. in Economics, Harvard - says: William Lazonick
"For three decades I’ve been studying how the resource allocation decisions of major U.S. corporations influence the relationship between value creation and value extraction, and how that relationship affects the U.S. economy. From the end of World War II until the late 1970s, a retain-and-reinvest approach to resource allocation prevailed at major U.S. corporations. They retained earnings and reinvested them in increasing their capabilities, first and foremost in the employees who helped make firms more competitive. They provided workers with higher incomes and greater job security, thus contributing to equitable, stable economic growth—what I call “sustainable prosperity.”
This pattern began to break down in the late 1970s, giving way to a downsize-and-distribute regime of reducing costs and then distributing the freed-up cash to financial interests, particularly shareholders. By favoring value extraction over value creation, this approach has contributed to employment instability and income inequality."
Profits Without Prosperity
Financialization - The Last Stage of Capitalism
At its productive zenith capitalism performed beyond anyone's wildest expectations. Sure, there were issues, like; persistent generational poverty, atrocious abuses of the labor class, neglectful product safety. But in the context of pure productive capacity, the capitalist system was the greatest productive engine mankind had ever known. However, it took a scant few decades, generally agreed to span the post WWII years through the early 1990s, when that potent productive capacity generated huge surpluses of consumer goods, it exceeded the public's ability to consume. Profit margins for producing dwindled. Large segments of the labor force were laid off for extended periods and some production plants simply closed or shipped production overseas to slash labor costs. There was lots of capital, but little requirement for production capacity to invest in.
Enter Wall Street.
John Bellamy Foster of The Monthly Review writes:
"This argument was rooted in the theoretical framework provided by Paul Baran and Paul Sweezy’s Monopoly Capital (1966), which was inspired by the work of economists Michal Kalecki and Josef Steindl—and going further back by Karl Marx and Rosa Luxemburg.7 The monopoly capitalist economy, Baran and Sweezy suggested, is a vastly productive system that generates huge surpluses for the tiny minority of monopolists/oligopolists who are the primary owners and chief beneficiaries of the system. As capitalists they naturally seek to invest this surplus in a drive to ever greater accumulation. But the same conditions that give rise to these surpluses also introduce barriers that limit their profitable investment. Corporations can just barely sell the current level of goods to consumers at prices calibrated to yield the going rate of oligopolistic profit. The weakness in the growth of consumption results in cutbacks in the utilization of productive capacity as corporations attempt to avoid overproduction and price reductions that threaten their profit margins. The consequent build-up of excess productive capacity is a warning sign for business, indicating that there is little room for investment in new capacity."
Commerce is not synonymous with capitalism. Commerce goes back as far in human history as two parties that decide to exchange four chickens for a pig. Whole villages prospered by that trade. Simple barter. Equal exchange (relatively) of goods, usually to the greater benefit of all involved. Capitalism as practiced today does not provide mutual, communal benefits. Financialized capitalism now trades Wall Street's financial instruments between firms or individuals, only those firms or individuals -prosper-, many times, even avoiding taxation on the transaction or dividends from those financial instruments. That is barely commerce, it is more a parasitic relationship to society as a whole, by value extraction, from the system, with no reciprocating benefits to the community.
From The University of California Digital Press Library
". . . Since feudal peasants possessed their own means of production, their economic reproduction was in a sense independent of the surplus-extractive demands of the lords. The production of a surplus product required extraeconomic compulsion over a labour process which the lords did not control or direct. To invest in improving the technical basis of this labour process would have been an extremely risky undertaking. Furthermore, because neither lords nor peasants depended upon access to the market for their subsistence (although they might well enter into market transactions by choice) they were under no direct economic pressure to produce competitively. As a result, the drive to innovate in order to raise productivity was absent as a general dynamic of feudal economy; the market did not impose this necessity upon peasants or lords, and the organization of the labour process was a disincentive to innovative investments by the lords . . . "
Emerging from its feudal heredity, capitalism went through five stages. Very much like the stages a human being endures to adulthood
- Infancy - Agricultural Capitalism
- Pre-teen child - Merchant Capitalism (which arose almost concurrently with agricultural)
- Teenager/early adult - Industrial Capitalism
- Career path adult - State Capitalism
- Retirement aged senior citizen - Financialization of Capitalism (which arose near the beginning of state capitalism)
As stated above, the financialization phase doesn't come close to meeting the needs of the whole of humanity, not even a majority of humanity. Since the appearance of the financialization stage, jobs have been lost (some forever), wages have stagnated over the last thirty five years and more Americans are living hanging on the economic cliff, one major life event from bankruptcy and poverty.
We're living in a paradigm where people are serving a system. The system has folded into itself and is not reciprocating service to the people, it's serving itself in favor of those operating this system, the one percent. We are now faced squarely with the task of collectively envisioning a new system, a system that serves us, we the people, not the other way around.
What would such a system serving humanity look like?
Remember, commerce has always existed. Moving past capitalism does not mean the end of commercial endeavor. For the most part, capital is being controlled by an exceedingly small ruling class for its own purposes and power. Due to technological advancements, capital is becoming less dependent on labor to add value to raw materials. We're experiencing a time presently, where ones livelihood should not be dependent on ones labor.
A first step is collective ownership of national productivity. Guaranteed Basic Income for all adult citizens spreads the wealth. Capitalists will assume more societal responsibility, not simply be wealth extractors with very little responsibility to the community at large. Pure profit driven incentive is too short-sighted and leads to the financialization loop explained above.
Now is the time to seize the means of production. We the people are collectively having that conversation now. Whatever the post capitalist future holds, it will require government intervention because it's apparent that capitalism itself is not willing, or able, to repair its economic inequities, environmental lawless misconduct and blind zealous pursuit of profit at the expense of Mankind.
In the vast arc of humankind's evolution, capitalism is simply a stage, it is not the height of society's intellect, there is a better way, a more sustainable, equitable way. The post capitalist phase will emerge from the masses. Let us regenerate our curiosity and imagination. Let art and heart inform our visions.
Please leave your ideas in the comments section.