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Spot the Crisis

from Peter Radford

We hear it all the time. It is a relentless drum beat on the left. Capitalism, we are told, is in crisis. This crisis is manifested in all sorts of ways. We – meaning those of us on the left – need to prepare. We need to counter attack. We need to seize this moment and retrieve from the mess whatever we can. Democracy, in various forms depending on who is writing, is our way forward. Only through democracy can we save society from the crisis in capitalism.


Where, exactly is this crisis?

This occurs to me because at the same time leftist writers are proclaiming the existence of crisis they are often, simultaneously, proclaiming the ever increasing divide in social inequality as defined by income or wealth. Capitalists are doing quite nicely I would imagine if these concerns over inequality are correct. Which they are.

So, where, exactly, is this crisis?

If capitalists are taking and ever increasing share of the national income, if they are accumulating an ever increasing proportion of the national wealth, and if they have managed to wrestle effective control of the ship of state from the majority of ordinary folks, how can they be in crisis? I would argue that things look pretty dandy if you’re one of them.

There is no crisis in capitalism if you are a capitalist. You’re on a winning roll. You are loving life.

It’s the rest of us that have a problem. We are the ones mired in crisis. We don’t have a crisis of capitalism. We have a crisis because of capitalism. That’s a big difference. 

Capitalists, of course, being driven solely by their ability to accumulate riches, are probably complaining even though they are rolling in money. That’s who they are. That’s why they succeed. They are single minded. They exist for wealth. They measure themselves by their wealth. They adopt any and all stratagems to accumulate more. They oppose bitterly and stubbornly anything that slows their accumulation of wealth down. And, as we all know, they will twist rules, cheat, and generally cause mayhem to get their way.

Above all else they hate sharing. Sharing, you see, just isn’t the way you accumulate wealth. Sharing is a limp and pathetic idea adopted only by losers who aren’t tough enough to win. Capitalists aren’t losers, so they don’t share. Which is why they cannot abide redistribution. If there’s one thing that will rally a group of capitalists and stop them tearing away at each other, it’s the prospect of a democratically designed effort to redistribute their hard-earned and righteously amassed wealth.

Which is why capitalists despise democracy. And it is why they constantly propagate the idea that social programs supported by redistribution are a kind of leeching or inefficiency imposed on the sleek capitalist machine that will, inevitably, slow growth down and eventually undercut our ability to pay for them.  They toss the word ‘entitlement’ about as a nasty epithet – as being entitled wasn’t as aspect of citizenship.

Anyway: back to the non-existent crisis. Ben Tarnoff reminded me of it in his article in the Guardian titled: “Donald Trump, Peter Thiel and the death of democracy”. Here’s the paragraphs that caught my eye:

This may sound like dystopian science fiction, but it’s also a perfectly reasonable political objective for someone of Thiel’s class position. It’s easy for liberals to dismiss Thiel as a “comic-book villain”, but this caricature obscures the fact that Thiel is a sophisticated thinker – and a perceptive one. His central observation, that American capitalism is facing a crisis, is unquestionably correct.

The past four decades of economic data make that crisis clear. Since the 1970s, the US economy has enjoyed far lower levels of growth than it did during its midcentury golden age. From 1920 to 1970, real per-capita GDP grew by a staggering 2.41% a year on average. From 1970 to 2014 it slowed considerably, to 1.77%. The slowdown in labor productivity has been even starker.

Thiel is acutely aware of these numbers. He is, in fact, obsessed with economic stagnation. Over the long term, stagnation doesn’t just threaten capitalism by limiting growth; it also runs the risk of turning people against capitalism, as their wages and living standards deteriorate. This is already happening, as the popularity of the Bernie Sanders campaign made clear. A Harvard survey from April found that a majority of millennials now say they reject capitalism; a third say they support socialism. The precise meaning of this poll is arguable, but it’s clear that young Americans, who make less money than their parents did at their age and have higher rates of poverty and unemployment, are moving left.

It’s safe to assume that Thiel is paying attention. The next American electorate will be more nonwhite, more working-class, and more leftwing. And they’re likely to demand more democracy, not less – not only from the political system, but from the economic system as well. That sets them on a collision course with elites like Thiel.

Note the key words: “… His central observation, that American capitalism is facing a crisis, is unquestionably correct.”

Unquestionably correct?

Despite all the empirical evidence that the share of capital of our total wealth is rising beyond its historical norms? How, exactly is this a “crisis”?

Well, as it turns out, it is crisis for capitalists like Thiel only in the sense that their greed demands more and that sharing is somehow morally wrong.

Now my point is simple: we ought to stop this old fashioned repetition of the notion that there is a crisis in capitalism. There isn’t. Capitalists are dong very well. Indeed if they weren’t we wouldn’t be talking about them. No. Not at all. The crisis Ben Tarnoff is trying to get at, and I think he is a good example of the problem we have in describing it, is one of democracy.

We have a crisis of democracy.

Capitalism is rampant and on a successful run. People like Thiel are complaining because they feel entitled to more and are concerned that a resurgence in democracy would hamper their ability to accumulate even greater riches. Tarnoff says this quite clearly in his article. What he ought to have emphasized more is that capitalists want to take advantage of our currently weakened democratic state to consolidate their position. In other words they want to kick democracy while it’s in the gutter. Framing this conflict as a crisis for capitalism is both antiquated and misleading. If we are to rally the people to fight back, they need to know why they are fighting. It is our loss of democracy that provides the rallying cry. Who cares about capitalists?

One last thing: tossing around GDP numbers spanning decades and pointing to the slowdown in growth as a crisis for capitalists also muddies the waters. It is a problem for all of us. Growth is what allows us to allocate more resources to things we like without having to resort to force or politically difficult argument. So slower growth is a problem for democracy too. More to the point: we need growth to be sustainable and not environmentally toxic, so making growth a purely capitalist issue sidelines democrats from needing to engage the topic constructively and leads too many left of center thinkers to view growth as a negative.

  1. Dou Gen
    July 24, 2016 at 9:14 pm

    In English “crisis of” can contain the implied meaning of “crisis because of” since “of” can suggest a wide range of relationships. There is no semantic problem with “crisis of capitalism,” and most people interpret this phrase according to context and have no problem understanding that it means “crisis because of capitalism.” Furthermore, many capitalist do not think things are just great, since they know that without government intervention contemporary capitalism could not exist. Others think that the global economic system is dangerously out of control and worry that another great recession or depression is likely. There are many types of capitalists out there, and the simple, wide-ranging preposition “of” allows us to speak of an appropriately wide array of relationships.

  2. July 24, 2016 at 11:30 pm

    People who speak about a ‘crisis in capitalism’ don’t seem to understand what capitalism really is. To those who would have the State control the means of “production, distribution and exchange”, capitalism is the antichrist – the bringer of evil to society. But in reality capitalists are everything from a street market stallholder to Alan Sugar. It began with individuals trading furs, arrow heads and hunting dogs thousands of years ago. It is the natural way of economics and the root of all wealth in the modern world as much as in the ancient one. Socialists would have us believe that there is a crisis because they wish to re-exert control over the distribution of the proceeds of production and exchange according to their often all too arbitrary and highly selective political agendas. Under their control, time and again real world scenarios have demonstrated that socialism creates far greater crises than capitalism ever did, or perhaps even could. Take your choice between the salt mines of Siberia and the dole queue.
    Having passed through the greatest crisis – that of socialism, with, amongst other great and memorable things the demolition of the Berlin wall marking its demise, some socialists would now have us rewrite history – and then, God forbid, re-run history, with all its dark satanic mills, corruption and loss of human rights, dignity and freedom.
    Capitalism “red in tooth and claw” is not in crisis – only our management of it. Turning capitalism into a dirty word again represents the last gasp of wistful socialist dinosaurs of the 20th century. Making the magnificent, enterprising, wealth-creating machinery of capitalism work better for more people is the real challenge we face, not creating more crises by going back to a failed and thoroughly discredited paradigm.
    Simon Lamb, author of Junglenomics – http://www.junglenomics.com

    • robert locke
      July 25, 2016 at 10:20 am

      Could not agree more. The real crisis has been the crisis of socialism as the alternative to capitalism. For most of the second half of he twentieth century, people living in Eur-Asia from Shanghai to Magdeburg lived under socialist regimes, which collapsed ingloriously in the last twenty years of the last century. Finance capitalism easily moved into he chaos of the collapse because nobody living in this vast area could believe in the socialism that had been created there, and nobody, even if they dislike the new capitalist order, wants socialism back. If socialism had not failed capitalism, which was barely hanging on as an ideology in 1945, would have disappeared. Capitalists do not need to fear democracy, its exercise will not bring socialism back. Think of something else.

  3. July 25, 2016 at 4:11 pm

    Too true. What critics should be complaining about is not the system, but how poor management leaves too many people out of that system. This arises in my view from a combination of excessive wealth capture among elites and the misinterpretation and misappropriation of value by markets. This is a human failing not a systemic one. My particular focus is on the crisis in nature caused by the drastic economic undervaluation of natural environments and their biodiversity (for example rainforests), which results in their being financially more valuable harvested than alive, or in the case of air and water – dirty than clean.
    This is a manifestation, not of capitalist greed as some would have it, but of inadequate market design and implementation – pilot error. The same could be applied to people left out of the capitalist loop – they need to be more valuable included within it than without, to powerful economic actors.
    Market failures like these will never be cured by abandoning a system that has raised so many millions out of subjection and poverty, but by influential economists and their political masters developing a deeper understanding of why such failures persist and how to correct them.
    Simon Lamb, author of Junglenomics – http://www.junglenomics.com

  4. Franklin
    July 25, 2016 at 5:04 pm

    I can,t agree less

  5. Dan
    July 25, 2016 at 8:42 pm

    People who say that capitalism is “the natural way of economics and the root of all wealth in the modern world as much as in the ancient one” haven’t travelled or read history enough. Neanderthals didn’t accumulate capital. The isolationism of post-15th century China was precisely non-capitalistic. It’s very difficult to explain the explosion of wealth following the European industrial revolutions if you imagine that capitalism always existed.

    Even today there is an array of modes of economic organisation that can’t be described as capitalistic. It isn’t particularly useful to describe the gift-giving societies of the south Pacific or the subsistence livelihoods of many sub-Saharan Africans with the same word as the activities of the New York Stock Exchange. Markets take various social forms.

    The choice isn’t binary. When people understandably talk about a crisis in the current economic system, it isn’t a counter-argument to blurt out: ‘but the Soviet Union didn’t work’ . There are shades of grey.

    Whatever problem ails us, pilot error isn’t only to blame – the pilots are conditioned and selected by the system. And one thing’s for sure: ‘influential economists’ aren’t going to rescue us, nor are the politicians, who have a vested interest in not understanding the failures, nor how to correct them. If you imagine that somehow a coalition of Romer/Obama/Stiglitz/Krugman/Mankiw and Lew/Hammond/Macron/Schäuble/Jiwei will ride to the rescue, then good luck.

    This said, I partly agree with Peter Radford that we’re experiencing a crisis of democracy as much as one of the economic system. Brexit and Trump may have their roots in economic stagnation, but they are manifestations of voicelessness.

    And lastly, as with words ending in -exit, can we please abolish the suffix ‘nomics’? It was bad enough in its Levitt and Dubner incarnation.

  6. David Chester
    July 26, 2016 at 10:51 am

    There is much confusion here. Capital should be considered (defined) to be goods that have been made to assist in the production of more goods. Clearly this does not include land. Consequently the exploitation of land and its influence on our social system is not due to capitalism. Yet most economists forget this and make the value of land into an item of capital and they assume that it is a capitalist issue. There is no crisis in the stock market where most of the real capital is being dealt with. The stock market follows some simple rules and when a particular company stops being viable and crashes, the price of its shares falls etc.

    Land is not the same thing although its price can suddenly fall to a lower value, it still retains some value, even after its bubble inflation value suddenly being burst, when developers find the land is too costly. This is a crisis and it will continue to recur as long as there is no means for stopping speculation in developing land’s value. By the introduction of a tax on land values, this would cease, because holding land unused for speculation in its value would no longer be profitable. Should a similar tax be placed on shares (as if there was a capital gain, on them all) there would not be anything like the same result–which proves the significant difference between land and capital.

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