It’s not the end of capitalism at all
There has been over the past three years a tremendous amount of guff written about the financial crisis being the end of capitalism. While I can see the attraction, in communications terms, of indulging the idea that these events form part of an epic transformative narrative, unfortunately it is completely untrue.
Let’s focus on Britain for the moment. If you look at capitalism through the lens of Marx, then it’s pretty clear that right now, capital has never been so ascendant over labour. Capital is capturing the returns to growth, and labour is losing them.
The best example of this is the absolute refusal of Britain’s workers to ask for pay rises. The inflationary price-wage spiral has completely failed to fire. The bargaining power of British workers has never been so weak. It’s not just about low levels of unionisation, it seems that the British worker now internalises the idea that their job can be done more cheaply in China, or by an eager foreign worker.
So that means when inflation routinely rests above 3, 4, or 5 per cent, wages fail to keep up, on the latest figures growing by just 1.8 per cent. It even seems to be the case in the public sector. Yes we’ll get massive strikes over pensions at the end of the month. But at the end of all this, it’s pretty clear that millions of workers will ultimately accept paying more, even after a real pay cut, for a palpably worse pension provision.
I first saw this at the Honda factory in Swindon a couple of years ago. Japanese just-in-time delivery stretched to their payscales. Workers accepted a 3 per cent pay cut for workers and 5 per cent for management in the place of compulsory redundancies, to cope with the collapse in world trade after the Lehman collapse. I called it the new “Honda Effect”.
So there is no wage-price spiral. Workers have been tamed, labour is mute.
Something similar is happening with savings. To support the economy nation states, like Britain, print money by the truck load. At least with interest rate cuts, one can see directly how borrowers or companies could benefit. But £275bn quantitative easing is crushing the pensions of current retirees, alongside savings income. And there can be no doubt that it has benefited large corporations and big banks disproportionately.
The euro crisis has got nothing to do with a crisis in capitalism. It is basically political. The single currency could, and would work, if German voters felt comfortable with spending their buoyant tax revenues on supporting the comparably trivial problems in Greece or Ireland. If Germany and Brussels can persuade Rome and Madrid to increase their economic competitiveness, it could even be something of a success. But this is a diplomatic game, not a fundamental problem with the economic system.
I see this on the streets of Athens and even at the Occupy protests I have seen in New York, London and Frankfurt. It’s very tempting to see all this as a global insurrection as TV cameras skip from riot to protest. What I think is remarkable is that protests like this aren’t much much bigger, given the crunching of living standards. Even in China, nominally communist, the soon to start largest migration of humans on the planet, that of migrant workers from rural China to its factories, is testament to the bargaining power of managed state capitalism over its people.
Of course there is one exception to this rule on capital versus labour. The industry where workers capture far more of the returns as wages and bonuses even than shareholders. Three-quarters of workers in this industry are expecting higher or the same bonuses this year than last, even as the economy plunges into slump. As one chief executive told me last year: “Marx would have been proud of the triumph of labour in the banks”. Perhaps football too.
Everywhere else capital is most definitely ascendant.
Right now it’s game, set and match to capitalism.
There are 30 comments on this post
Peter Jones’ take on capitalism is that he can’t give to charity if he cannot collect money.
REVOLUTION! REVOLUTION! REVOLUTION!
I’ve been at occupy London since the start, and when asked by media people if I’m anti capitalist, I respond “define captialism” It seems to have become a buzz word, not a good term for defining anyones position on anything. I’m against a system where money is invented by banks as debt, where financial institutions gamble in highly deregulated markets, keeping the spoils when they win and forcing populations to pay when they loose. I’m against putting profit before human rights and dignity and the health of our planet. I’m against a political system that sees near identical parties and corporate media deciding the issues of the day and how they should be debated, discussed and dealt with, instead of the people these issues effect. I’m against private profit motives corrupting education, health care, justice systems and other essential public services. I’m against the fact that there is enough food in the world to feed everyone and yet over a billion people go to bed hungry everyday because corporations control the food supply and distribution. Does that make me anti capitalist? Or simply pro people, justice and fairness?
YOu say there isn’t a fundamental problem with the current version of capitalism. There most definitely is but the biggest fact is that 99.9% of the population, including sadly our MPs, have no idea about how the system actually operates. Capitalism knows that the population is ignorant of its practices- and by this I mean the banking/monetary/ macro-economic system- and it spend an enormous amount of money on PR to ensure that the population don’t find out the truth. The true enemy of this type of capitalism is popular democracy but capitalism’s triumph is so absolute that no party would dare question the current model of capitalism. Once people start to educate themselves on the banking model- a global fraud committed by the super rich against the poor- then the system will be in trouble. Unfortunately most people think that criticising the current version of capitalism makes you a communist and don’t see how you can have an enhanced, better version of capitalism which does not by absolute design HAVE to fail every 10-15 years or so. Capitalism is safe as people are too frightened or disullisoned to speak out against it- not that they know how it works anyway. Depressing…
Just one question : if purchasing power of the working class is going down , if existing pensions and savings are doing the same , and taking into account that there is far more workers , pensioners and small savers than billionaires , how does the government expect any kind of growth ?
I think Vigilante Teen’s point is crucially important. The Occupy movement would not have the widespread support it does if it were anti-capitalist. Capitalism to me means simply that if somebody invests in my work, helping me to produce or market it, they get a fair ROI. Nobody would argue with that – it’s essential for our society. But when bankers trade in share values and options in what is effectively a form of pure gambling, adding nothing of value to the economy while risking our livelihoods and savings, you can see why there’s a growing anger that the Occupy movement is embodying. When the media call it “anti-capitalist”, it seems they are just trying to dismiss the whole thing as the opinion of a few cranks.
YOu need to go a few levels higher than the stock exchange gamblers. It starts with the central banks and their owners (some people think we own the BoE!!!) who, have staged in effect a coup against elected governments. Remember that THE single most important factor in an economy- and therefore its political system- is money. Control money and you control the economy, the people and the government. It is one of THE reasons why people are so disullisioned with politics: the people are fed a diet that they cannot change the system. No party is committed to any real change in the system. Therefore without this the ability of any government to affect any real change in the lives of the people is severely limited: it is reduced to playing around with the periphery whilst it must ensure that the banks and its owners become ever more prosperous. If anyone wants to know how the system works then type in Renaissance 2.0 into youtube and follow the 8 short lessons.
If you mean Capitalism is winning then there’s little evidence to the contrary. If you mean Capitalism is a suitable ideology to serve the needs of humanity… well I guess every one knows it isn’t but what do you do without a credible alternative? Socialism landed in the dustbin of history more than two decades ago and whilst Islamic economics offers interesting solutions to our contemporary problems it tends to come as a package not always appealing to the Western palette.
Pluralism provides a perfectly viable alternative to pure form any of the above isms and did so throughout the heyday of the US economic ascendancy.
spoken like a true capitalist there wmd. This is what makes the triumph of capitalism so absolute that enough people think that the current version- version- of capitalism is the only model. Question it and you are automatically a socialist or a communist Personally I am a fully fledged capitalist but I realise that this current model of capitalism is a farce- a huge, grand fraud that is committed by banks and their majority owners against the people and governments. I would like to see the control of money changed inside a capitalist system. Do this correctly and you will actually have an enhanced capitalism that is not designed to fail every 10-15 years. The trouble is that not enough people are aware that other capitalist solutions and models exist.
Correct D. You only have to see how the financial institutions – including the pension companies who are ‘looking after our interests’ – voted in favour of Bob Diamond’s extreme salary. Why? Probably because with that benchmark set, their own salaries will have to be revised upwards.
But you can only con the people for so much of the time before they react.
Surely this is exactly the ‘victory’ of capitalism that Marx predicted as a prelude to revolution. All the wealth accrues to one class who then end up having their throats cut
Faisal: I haven’t seen much on a “final crisis” but plenty questioning the “cost” of supporting mismanaged “capitalism”. I feel a little surrounded by daily problems associated with the cost of “living” here in the UK, particularly with respect to housing costs, so this is a subject which interests me.
It’s great to see you’re able to discuss industrial relations – I had come to believe that economic journalists working within the British media were no longer allowed to; and I commend you for your optimism. How much of your optimism would you say is dependent on UK workers continually being encouraged to blame the faults of their fellows, be that race, creed, colour or relative aptitudes, for economic woes?
And I wonder, do you think it’s possible that the internet could prove to have distorting attributes which make that “normal” muting effect upon labour a little more difficult for capital to achieve this time round?
Economic growth is dependent on a population that is striving for more material wealth than they currently have. Increasingly the populations of the West are instead striving for imaginary wealth in World of Warcraft, Farmville, etc., watching their DVD box sets, etc. There’s nothing particularly wrong with that, but it’s a far cry from the situation in China, where the average person has only a tenth of the wealth and would to at least have a washing machine. So comparisons between East and West are pointless.
And this is just as true of people with $10m. Once they have a certain level of material consumption, they are physically unable to consume any more. They have to measure further success by aiming for a fortune of $100m, and spending 10x as much for the same things they could already buy – consuming the same, with higher price tags.
Super-salaries in the financial sector are a localised form of hyper-inflation caused by the way money is constantly being created but new real value is not.
It’s time to face up to the horrible truth: people in the West are doing okay. There is no epic struggle for anything any more. It’s not the end of the world.
Capitalism is reaching an apex I think. It is winning, no doubt, has been for decades, but as the concentration of wealth and power increases to farcical levels I think it will be unsustainable because ordinary people, through their suffering, will begin to see it for what it is. For decades capital has been moving in one direction. Up. The rioters, overwhelmingly from poor backgrounds, were the canaries in the coal mine. As the extreme concentration of wealth inevitably starts to really impact the living standards of the well-educated middle class I think we are going to see social unrest of another order of magnitude. I think people are going to reject the autonomous dictates of the financial system that is working forever against them. In Europe ‘the markets’ are even now blatantly installing unelected leaders in Italy and Greece to solve debt problems by pursuing with a renewed vigour the very neo-liberal agenda that caused the crisis in the first place. Surely this trend, projected to its conclusion, must meet with fierce resistance at some point. Capitalism may be winning but it contains within its structure the seeds of its own downfall; its greed knows no satiety.
Taliban capitalism has failed! Masses all over the world are paying for the ugly usuary.
We need fundamental rethinking of banking based on human needs and values.
Interest rates must not be allowed to ruin people and countries.As we control the domestic money lenders we must seek to control interest charged by the so called sovreign funds which goes up and up with little help from Moodys!
We need to set up little soverign IMF which should replace the current IMF which suffer from credit deficit!
Banks and Hedge funds must be discouraged to gamble with food and related items.
Yes we need capitalism BUT with “HUMAN FACE”!
Not only with food and related items .
Hedge funds played with the CDS to sink Greece , and when there was no more money to make with Greece , the attacked Ireland and later Portugal.
All that with the complicity of the US rating agencies , proving that it is more than urgent to have European based ones.
As result a few hundreds made billions of $ by ruining the life of millions of Greek , Irish and Portuguese citizens .
But as they use part of the money they make to fund politicians don’t dream about any kind of change.
The fact that workers are ‘accepting’ wage freezes etc shouldn’t suggest that they think they are right. At times the system seems too big to change and it is hard to see how an ordinary person can make a difference.
However, there also comes a point when things get so so bad that ‘there is nothing to lose’ and that is when capitalism will be in real danger.
I accept that capitalism is going to be the economic model because no one has come up with a better one so far. But it has got out of hand – the balance between top and bottom is too great, and people will only accept the ‘haves’ thumbing their noses at the ‘have less’ for so long.
The range of people on OWS protests suggests to me that this is a real warning to those who think they can cash in on the excesses of capitalism. Add to that head teachers voting to strike for the first time in their history and you may not be seeing the end of captialism but hopefully its reining in.
I don’t think people have fully realised just how far living standards are going to fall in the years ahead. Remember Vince Cable saying about a year ago that politicians weren’t being honest enough with the public and preparing us for the changes to our lives?
Well, he said that before the Euro crisis took hold, so he was expecting growth of 2.5% this year and a strong recovery, so what did he mean?
I think he meant that even with a growing economy, rising employment and growing exports we will still have falling living standards with inflation eroding stagnant wages for many years.
So the recovery will only really be a recovery on paper, it won’t feel like one.
People genuinely believe that when the recovery kicks in living standards will shoot up again. I’ve even heard people who have got the idea that when VAT ‘drops out of the figures’ and inflation falls that things are going to get cheaper in the shops! When the permanent fall in living standards penny finally drops that is when workers thoughts will turn to wage rises.
If they believe that it is because they watch too much the BBC and listen too much to the PM .
What is needed here is German style Supervisory Boards, which also acts as the remuneration’s committee. This would reduce the deferential in income between the top 20% and the Bottom 20%. At this time, the differential stands at 69 times.
Faisal,
Your piece is a classic example of why media standard module capitalist economists can’t be trusted, especially when they come from Manchester
It is true capitalism is currently in the ascendant. But it was also in the ascendant when The Charterists were broken. None of it stopped an inevitable historic shift toward socialism and social democracy. This will continue despite the current state of affairs.
Temporary suppression of the union movement will eventually result in reformation of organised dissent, though it is likely there is a good deal more misery to be inflicted before we get to that point. Trotsky long ago pointed out, “Revolution only happens when there is no other way out.” He also exactly forecast the collapse of the totalitarian Stalinist Soviet Union.
Capitalism has run out of excuses. Now it has nobody to blame but itself. You won’t find many people dopey enough to believe everything was caused by “public debt” when they see capitalism running away with billions while destroying innocent lives.
And for gawd’s sake throw that MBA and economics degree in the bin. They aren’t worth a carrot. You could do with a healthy dose of…
The ‘Survivor Principle’ will always apply. If we attempt to make capitalism seem fairer it won’t be too long before some believe it’s still not fair enough. So if we make it fairer for the bottom 20% but some of them still fall further behind the top 20% – what do we do?
Who is greedy, who is feckless?
Surely, if the revolution is going to come from anywhere, it’ll be from those who are unemployed, rather than the ‘proleteriat.’ You make the assumption that working class has to revolt in order for capitalism to end, try one million young people.
‘What I think is remarkable is that protests like this aren’t much much bigger, given the crunching of living standards.’
Most people are not big picture thinkers. They only have limited capacity to understand the full extent of what is going on. Economic jargon makes things very opaque.
Of those that do understand, many have jobs to hold down and bills to pay…’it seems that the British worker now internalises the idea that their job can be done more cheaply in China, or by an eager foreign worker.’ Things are getting worse for them but they just have to put up with it. People can put up with a lot of shit before snapping.
I think a lot of people react to difficulties in their economic lives by seeking escape in substances, vices and so forth, rather than questioning their circumstances. Gadgets have labotomised an entire generation of kids.
I wish the protests were bigger but I’m not surprised they’re not.
Usurious system based on so called financial services, banking, zero worth money, private super banks (federal/central banks) is the root of the problem. Minor manipulations and policy will not prevent the misery of an irrational imaginary wealth based system. This is why we are seeing a support for overthrowing of regimes now, as the real wealth must be accessed, people are falling for it. Support the oppressed in Syria, N. Africa, Middle East & Globally.
Capitalism for the masses but socialism for the rich
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