Quote: Capitalism
from Peter Radford
While preparing for a speech here I came across this:
The shrinking of the middle class is not a failure of capitalism. It’s a failure of government. Capitalism is doing exactly what it was designed to do: concentrating wealth in the ownership class … That’s the natural drift of the relationship between capital and labor, and it can only be arrested by an activist government that chooses to step in as a referee.”
That’s Ed McClelland writing in Slate.
It’s also the point I have been making here for ages. The conflict between capitalism and democracy needs to be managed. We cannot leave either unattended. Unfortunately America has, for four decades or so, bent over backwards to privilege capitalism over democracy. The result is the ongoing economic crisis that we continue to live through.
It also accounts for the egregious levels of inequality we are suffering through and which threaten our social cohesion. perhaps it will take the demise of the middle class to focus voters on the need to re-establish a balance between the two. In the meantime it behooves us on the left to remember that we have the antidote to capitalism at hand. It is a force that allows us to constrain capital and make it work for all of us and not just the ownership class. And it is a force that allows us to accomplish the redistribution of the fruits of economic advance without risking the loss of that advance. Nor does it rely on exaggerated or extravagant claims that its utopian rivals are built upon. Nowhere within it are claims of great historic movements towards salvation that inevitably deteriorate into authoritarian dictatorship. Nor are there naive reductive claims of individualism that bear no relation to reality.
We can bend the arc of capitalism to our will if we wish. But to do that we must protect democracy. And in recent years we have overlooked that protecting democracy is an ongoing process not something that once done is done forever.
Our complacency has as much to do with the triumph of plutocracy as the desire for power of the ownership class has.
Unfortunately the severance of politics from economics has left economics a tool in the hands of the plutocrats. It is perverse for a social science to be so relentlessly anti-social. Or, rather, to have adopted such a strange and essentially anti-social definition of social.
That is our small part of the great re-balancing that needs to take place.
Let’s get on with it.
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Real-World Economics Review Blog 
The major problem since the de-linking of the US dollar from the Gold price (1971) has been the money printing focus of central banks to fuel public and private spending with ever decreasing interest rates and thus reduced risk profiles.
This increased asset prices (wealth effect) and debt ratios far exceeding the REAL economic wealth (GDP). This is now at an unprecedented level that will lead to the next depression in the near future.
The whole system is saturated with debt that has little hope of being paid off. the next large default (GFC like) will bring down the entire house of cards (Junk bond market?).
Therefore, capitalism has been tampered with as have free markets. True economic signals were thus impossible to detect with these impediments as the system has been managed by central banks with complicit politicians, who only have a short term view.
Peter, McClelland’s piece is actually in Salon, not Slate, and it’s titled “RIP, the middle class: 1946-2013.” And the ending is as insightful as the quote you cite. “The United States will never again be as wealthy as it was in the 1950s and ’60s. Never again will 18-year-olds graduate directly from high school to jobs that pay well enough to buy a house and support a family. (Even the auto plants now demand a few years in junior college.) That was inevitable, due to the recovery of our World War II enemies, and automation that enables 5,000
workers to build the same number of cars that once required 25,000 hands. What was not inevitable was the federal government withdrawing its supervision of the economy at the precise moment Americans began to need it more than at any time since the Great Depression.” Seems like McClelland is saying that withdrawing that supervision was not an accident but a deliberate act intended to destroy the middle class, all those “blue collar aristocrats.” Now that requires a lot of hate and envy. And it was clearly based on an ideology that was not the US Constitution.
“Capitalism” is, by definition, a system controlled primarily by “market regulation”, which is incompatible with “government regulation”. To look, then, to government to ‘counterbalance’ capitalism is a bit of a contradiction. We need to go beyond such crude economic system categories — “capitalism” and its “utopian rivals” (“communism”, “socialism”, etc.) — and instead evolve economies based on the features we want them to have and the results we wish them to produce, not on rough summaries of the regulatory mechanisms by which they operate.
Or it needs more radical change. The function of capitalism is to concentrate wealth, as you say. The factors that limit this concentration are collective action like unions and taxes, and disruptive change. Technological change in the means of production, large changes in consumer taste, changes in what is considered valuable. Changes cause existing capital to depreciate rapidly and force asset owners to share wealth as they’re compelled to shop for new assets at unfavourable prices.
In classical business cycles this creative destruction has reliably distributed capital in the direction of more equality. What’s new since the late 20th century is that capital has abstracted itself to the point where it can absorb the changes without much dilution. So we see old media companies adjusting relatively well to digital, old manufacturers retooling for completely new products, we’ll probably see old energy companies successfully switch to renewables, and so on.
The business of capitalism has become abstract enough that old money can adapt to new value streams without redistribution, and that is very dangerous.
McClelland falls hook, line , and sinker for the plutocrats’ favorite argument against the possibility of re-creating another Golden Age :
“…Now, with the perspective of 40 years, it’s obvious that the nonstop economic expansion that lasted from the end of World War II to the Arab oil embargo of 1973 was a historical fluke, made possible by the fact that the United States was the only country to emerge from that war with its industrial capacity intact. ”
That might carry some weight , if not for the fact that several countries that were devastated during the war experienced comparable and contemporary “Golden Ages” :
“…Contrary to early predictions, this high growth also included many countries that had been devastated by the war, such as Greece (Greek economic miracle), West Germany (Wirtschaftswunder), France (Trente Glorieuses), Japan (Japanese post-war economic miracle), and Italy (Italian economic miracle). ”
https://en.wikipedia.org/wiki/Post%E2%80%93World_War_II_economic_expansion
No , what made the Golden Age possible was policy , exemplified by FDR’s New Deal , and what ended it was the combination of the oil and Volcker shocks , setting up the Shock Doctrine economic rearrangements of Maggie and Ronnie , a malignancy that would spread widely.
Reboot to a Golden Age policy mix or instead resign ourselves to keep licking the boots of the “creators” – that’s our choice.
“…what made the Golden Age possible was policy , exemplified by FDR’s New Deal…”
Marko.
“Capitalism is the “best” system to date devised by mankind. As it is administrated, perhaps, is where the “flaw” is manifested. If capitalism used its Central Bank properly,that is for the betterment of the common good, with equality and justice for all, capitalism would be the best ways and means to help “form a more perfect union….”, Pontifical Council.
SOLUTION.
“LEGISLATE FOR “We the People” WHAT WE HAD LEGISLATED THE CENTRAL BANK TO DO FOR THE Private For Profit Banks (PFPB) ! ISSUE OUR OWN MONEY AS LOANS AND CHARGE A TAX CALLED INTEREST ! ! ! ”
Create an honest Central Bank that shall fund-
““We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity,…”
The crucial issue mentioned in the post is the severance of politics from economics, which makes us blind to the deep relationship between the two. In my paper on the Methodology of Polanyi’s Great Transformation, I have explained how Polanyi shows that the three spheres: political, economic, and social — are closely related to each other and cannot be analysed in isolation.
http://ssrn.com/abstract=2457299
This has RADICAL implications — we need to start over from scratch, in our analysis — furthermore, existing heterodox attempts to reformulate economics are also doomed to failure if they do not take into account the political and social spheres simultaneously with the economics.
i wonder who the ‘we’ is that overlooked protecting democracy. in my area (wash dc –its on wikipedia) there are huge numbers of people involved in trying to ‘protect democracy’—evrything from Ciitizens united on the supreme, koch brothers, endless community meetings and protests, some theoritizing on alternative consensus and voting processes—and this effort is met by a huge ‘pushback’ mostly from the evangelical and republican right wing (redistricing, voter id…) Also unfortunately those protecting democracy also have ‘egos’ and personal lives, and sometimes they are willing to ‘ditch democracy’ if it means they have to give up some of their power.
(i was involved a bit in ‘green party politics’ and while that emphasizes participatroy democracy alot of people decided that was ‘for the future’—and right now ‘we’ must organize to get ‘me’ elected (even if they already have a nice academic job). Ralph Nader and Amy Goodman didnt have in my opinjion an objective opinion of the Gore-Bush-Nader campaign and didnt care to develop one. Also alot of organizing is so buerocratic its unpleasant unless it comes with a hefty paycheck—though ‘leaders’ always want to harness free labor to their movement and cause—and they will throw you under the bus when its proves conveniant.
Slate is not exactly a bastion of support for resisting complacency. They are quite comfortable writing about the tragedy of inequality, etc. I personally have cut down my participation in ‘social movements’ about 88% since most of the people in them mostly get ignored and just asked to show up and repeat a sliogan someone created. This is why alot of young and other people are really just aiming to ‘get by’ in the system and if they have energy and some competency do a ‘kick start up’ or a law degree or tenure, although ‘leaders’ say this is selfish (though they themselves have degees and tenure etc.) Also many of the ‘poor’ (who i often associate with) are so involved in drugs, crime, serving in temp jobs for spare change, couch surfing , living off food stamps that joining in with the plutocracy if possible is both more pleasant and safer—there were 2 homicides in my area last few weeks over petty stuff. .
Of course, this is not syria, or pakistan, or nigeria.