from David Ruccio
Richard Reeves is right about one thing: time is crucial to capitalism’s legitimacy. The premise and promise of capitalism are that the future will be better than the present. And “if capitalism loses its lease on the future, it is in trouble.”
The fact is, things are not getting better for the vast majority of American workers. They’re falling behind. For example, as is clear in the chart above, the labor share in the U.S. nonfarm business sector has fallen more than 13 percent since early 2001—and there’s no indication that trend will be reversed anytime in the foreseeable future.
Time is clearly running out on capitalism.
It’s not as though Americans are unaware of this and other related trends, such as the looming climate crisis.*
Back in 2014, most Americans (62 percent) said the economic system in the United States unfairly favored powerful interests; only about a third (34 percent) said it is generally fair to most Americans. According to the Pew Research Center, those percentages are almost the same today.**
Moreover, the public continues to say that “business corporations make too much profit.” Today, 56 percent of the public says corporations make too much profit; only 39 percent say “most corporation make a fair and reasonable amount of profit.” These views have held largely steady since 1994.
Americans hold similar views about the fairness of the Trump tax cuts (49 percent disapprove versus 36 percent who expressed approval) and the federal tax system (around 60 percent feel that some corporations and some wealthy people don’t pay their fair share).
Clearly, capitalism has lost a great deal of whatever legitimacy it once enjoyed in the minds of Americans.
Time may be running out for capitalism but time is still on our side. Because the same future orientation—the fact that “once the capitalism engine revved up, the future entered our collective imagination”—also includes the possibility that things can in fact be better in the future, even if making things better requires fundamental changes in the way the economy is organized.***
It is that relationship to time created by capitalism, according to which “each generation will rise on the shoulders of the one before,” that both leads to resentment about the unfulfilled promises of the existing economy and sparks the imagination of a radically different way of organizing economic and social life in the future.
*Reeves makes what can only be considered a risible argument on this score: “Blaming capitalism for climate change is like blaming distilleries for drunk driving.” The fact is, global warming is the result of the Capitalocene, in which the activities of corporations have made enormous profits both producing and using fossil fuels—and they haven’t been made to pay for the environmental costs, which they’ve managed to shift to the rest of society.
**The only notable change in the last five years is the fact that Republicans’ and Democrats’ attitudes about the fairness of the economic system have moved in opposite directions: in 2014, there was a 20 percentage-point gap between the shares of Republicans (51 percent) and Democrats (71 percent) who said the economy unfairly favors powerful interests; that gap is now 41 points (40 percent of Republicans versus 81 percent of Democrats). While about eight-in-ten Democrats and Democratic leaners say the economic system is unfair, a majority of Republicans and Republican leaners (56 percent) now say the economic system is generally fair to most Americans.
***The problem of time has long eluded mainstream, especially neoclassical, economists. For example, the only way they can envision a general equilibrium of markets is to suspend time, forbidding all trades unless and until there’s a price vector (announced by the mythical “auctioneer”) that brings all (actually, n-1) markets into equilibrium. Once time is introduced and trades take place without supply-demand equilibrium, all bets are off. Then, it’s likely the economy will not be in equilibrium, and may even move further away from equilibrium over time.
Real-World Economics Review Blog 
Ruccio, I hope your retirement doesn’t lead to a decline in your posts. Please make this one of your retirement hobbies.
In this one you include Richard Reeves’ absurd statement, “Blaming capitalism for climate change is like blaming distilleries for drunk driving.”
Reeves also says something that is dead wrong. He says that the Club of Rome’s “Limits to Growth” predictions about growth being stalled by resource limits has not come to pass now, 50 years later. I cannot find the reference, but I clearly recall a study done a couple of years ago that found their predictions amazingly accurate. The problem with Reeves’ point of view is that it hides a true belief that technology will save us, that the Club’s predictions have not “come true” because technology pushes those resource limits outward. Such belief usually ignores how technology also pushes the limits of waste disposal. Fracking, for example, pushes the limits of oil availability, but it also massively uses and pollutes scarce groundwater.
Ruccio is correct: “global warming is the result of the Capitalocene, in which the activities of corporations have made enormous profits both producing and using fossil fuels—and they haven’t been made to pay for the environmental costs, which they’ve managed to shift to the rest of society.” That’s what corporations do by design, and always have done.
But Reeves is right about this: “The biggest threat to capitalism is not socialism. It is pessimism.” Few things make me prouder than to be included with such a threat, because these pessimists are paying attention to the evidence. In my view, the sky is not falling, it already has.
“The biggest threat to capitalism is not socialism . It is pessimism’.”
Once again I will stick my neck out. Because it seems to me that in in some sections of academia there is a subtle push for socialism by some who ignore the history and failure of socialism as an ideology, that indicates that socialism is wide open to the holders of power. For example listening to people who have experienced the unbridled ruthlessness of those in power or read books such as Wild Swans Three Daughters of China by JUNG CHANG.
Thus in my simple view the problem with any system is the lack of a genuine democratic system. On this basis I have to agree that pessimism is a major problem, but I also believe that it is pessimism caused by many people experiencing and thinking that nobody wants to listen to their concerns. To clarify I am against socialism as an ideology hence I believe a social conscience is missing from capitalism and this is what urgently needs to be addressed.Ted
I’m curious: by “socialism” do you mean the radical concept of sharing? (I did not invent this; my brother Bob might have).
Edward, do you make any distinction between democratic socialism (which are mixed economies) found in the Nordic countries such as Norway, Sweden, Denmark, etc., and the boogieman socialism you parrot on this forum? Now you may think I am being harsh, but you give not one iota of historical context. That is therefore little more than fear mongering.
Now, if you are specific, with historical context, you might have an argument. But I am not going to do your work for you.
You might want to read The Nobel Factor and get some clarity on the different historical contexts of the meaning of “socialism” as it has actually been practiced in countries like you mention above. The are after all, far healthier democracies than the US today.
Show me any society, and I’ll show you examples of socialism within it.
file:///Users/johndoyle%201/iCloud%20Drive%20(Archive)%20-%201/Desktop/CHARTS%20ETC/Meadows-limits_summary.pdf
This is a 30m year summary of the “limits to growth”
Capitalism is a dysfunctional framework, particularly in its “theoretical” set up. It is dysfunctional mainly because it not only ignores what history, anthropology, and the other studies that look regularly and deeply into how humans make themselves and fulfill their wants and preferences but models its prescriptions for the future of humans on ways of life that have little historical or anthropological support. Capitalists virtually screams to humans, “you are what we say you are.” Regardless of the events and actions of over 5,000 years of human society and culture. This is not just ahistorical; it’s madness.
In 2012 Jorgen Randers, one of the authors of the original “Limits to Growth,” wrote a follow up, titled “2052: A Global Forecast for the Next Forty Years.” Randers wrote the book to assess his own worries about the future, but also help other asses their worries. He recognizes that some will misuse his forecast, but the more socially inclined will use the forecast to clarify what new policies, legislation, and societal institutions will have the greatest effect in creating a better future, so they know where to put in their effort. Others will want to know what the future holds in order to improve their chances for a better life during the next several decades, for example by moving to another city, country, or region before it becomes impossible, or by changing a profession before it becomes outdated. Finally, some will want to adapt up front to the world of the future, to coming hot spells, sea-level rise, migration flows, more centralist government, and destruction of attractive tourist spots.
On the topic of economic and political equality, Randers writes, “From a half century of progressive enlightenment and increasing well-being we are moving to a new Dark Age of hard times for the many and inordinate privilege and wealth for the few….As I see it, we are entering an age of increasing polarization economically, socially, culturally, and environmentally. In mature markets there will be more poor and more inequity—polarization between the pauperized many and the fortunate few. In emerging economies we will see less poverty—an economic and social evolution like we saw in mature markets after the Second World War. They are catching up, as the Western rich are falling back. However, common to both will be a general degradation of environmental conditions and an increasing frequency and severity of extreme weather events affecting economies everywhere, albeit in different ways. Emerging economies will have to learn to deal with emerging climate change, from soy and wheat affected by too much and too little rain in the Argentine pampas to pipelines and other infrastructure in Russian Siberia breaking up from sagging tundra. Overall, I expect the international community will not put in place robust emissions-reduction limits until disaster is upon us, and probably then policies and money will go to emergency response and remediation, as prevention will be seen as no longer possible. Mature economies will fall behind as they fail to modernize and green their industrial infrastructure. China will win this game—in wind, solar, battery technology, and railways. Oversimplifying the situation, the cause of the recurrent crises in the West is the triumph of financial capitalism, aided and abetted by its neoliberal institutions—the Federal Reserve, the US Treasury, the International Monetary Fund, the European Central Bank, international patent rights legislation—and coupled with the takeover of government by a corporate and financial oligarchy. There are exceptions, noticeably the Nordic Model with its real social democracy, its work-life constitutions mediating in a fair way the interests of capital, labor, and government, its natural resource laws making sure the extractive industry pays proper taxes, and its welfare state institutions meant to create well-being for the many through incentivizing employment.”
Randers does not forecast the end of capitalism, but he considers it a likely possibility.
Empirically, on the basis of success the Chinese model IS the leading alternative to the corporate capitalism we see today: allowing private ownership but keeping much of the economy owned by the state & operated by its firms. We currently witness this statist model with the public agencies in Egypt, Iran, Venezuela, etc. in which public security bodies & others divvy up the most valuable economic production/transactions.
If a nation is democratic, the percentage of private firms is apt to remain high I imagine. This is probably a reflection of our common tribal, familial past. Really, who wants to be in a giant firm unless job security, sense of duty or command position are included. Yet there are many who apparently have one or more of these concerns in mind.
Economists are not much of a part of this discussion really, as we either reflect the status quo (untenable) or seem not to grasp how various nations are developing their alternatives even as we speak. I have lived in Europe long enough to see at least temporary changes in many nations based on the number of immigrants reaching their borders. Its working well in my part of Germany, but lots of Europeans disagree–even as some of the newcomers are already founding their own restaurants & groceries..
James, history contains many versions of capitalism, or near capitalism. Perhaps one of these would be a good option rather than the financial capitalism dominant today?
Agrarian capitalism, sometimes known as market feudalism. This was a transitional form between feudalism and capitalism, whereby market relations replaced some but not all feudal relations in a society. This was prevalent in the US before its Civil War. With the South displaying a version with more feudalism and less capitalism.
Mercantilism. National governments seek to maintain positive balances of trade and acquire gold bullion.
Industrial capitalism is characterized by its use of heavy machinery and a much more pronounced division of labor. America began down this road after the Civil War.
Monopoly capitalism is marked by the rise of monopolies and trusts dominating industry and other aspects of society. Often used to describe the economy of the late 19th and early 20th century.
Colonialism is where governments seek to colonize other areas to improve access to markets and raw materials and assist state-owned capitalist firms.
Welfare capitalism in dominated by mixed economies and governments seeking to provide a safety net to alleviate the worst abuses of capitalism. The heyday of welfare capitalism (in advanced economies) is widely viewed as 1945 to 1975 as major social safety nets were put in place in most advanced capitalist economies.
Mass production. Post-World War II saw the rising power of major corporations and a focus on mass production, mass consumption, and (ideally) mass employment. These are used to propel the rise of advertising to promote mass consumption, as well as economic planning by firms to ensure profitability.
In State capitalism the state intervenes to prevent economic instability, including partially or fully nationalizing certain industries. Nordic block economies are here. Some economists also include the economies of the Soviet Union and the old Eastern Bloc in this category.
With Corporatism, government, business and labor collude to make major national decisions. Notable for being an economic model of fascism, it can overlap with, but is still significantly different from state capitalism.
Financialization, or financial capitalism involves domination by the financial parts of the economy (like the finance, insurance, or real estate sectors). Profit is more derived from ownership of an asset, credit, rents and earning interest, rather than productive processes.
Finally, there is Laissez-faire capitalism. A social system in which there is no government intervention in the economy.
The questions to ask ourselves are:
Do we have to have either capitalism or socialism?
What might be a third alternative system that integrates the best aspects of both and deletes
the flaws and falsehoods of both sides of the capitalist/socialist duality?
Is the economic problem economic, or might it be parasitic private finance and its paradigm of Debt Only as the sole form and vehicle for the distribution of credit/money?
Where and how could we implement monetary and financial policies to solve individual income scarcity, systemic austerity and chronic price and asset inflation that all heterodox economists agree are the major problems that afflict individuals and the current systems?
Craig there are more versions of socialism, historically than capitalism. So, take your pick.
Yes there are. And every one of them is a mere reform that ideologically and empirically resides entirely within the present monetary paradigm…which is the true and most causative source of the economic problem. And the new monetary paradigm/pattern of Abundantly Direct and Reciprocal Monetary Gifting is its resolution.
Steve Keen, who I consider the best economist on the planet, has recently come out with the initial results of trying to derive an energy based growth cycle in economics.
This is a noble research effort to be sure. However, deciphering a new monetary paradigm to replace the present one of Debt Only as the sole form and vehicle for the distribution of credit/money (which hasn’t changed for the entire 5000 year old course of human civilization) could directly and much more quickly enable us to make the most efficient energy choices and changes by inverting the present monetary paradigm reality from “too costly” and “undoable” to as much as 4 times less costly for consumers (while still keeping enterprise completely whole on their overheads and margins of profit), and a straight forwardly rational necessity because survival trumps every other consideration.
Again, complexity and erudition are interesting and even necessary for precision, but compared to the depth of insight and radical beneficial temporal universe effects of paradigm perception/wisdom they are “as filthy wrags”.
Craig, that’s not quite right. Several forms of historical socialism have been radical. Look, for example at the Oneida Community. Nearly all the utopian religious and secular communities embraced a form of radical socialism. The current versions of Nordic socialism are not radical, but they do make radical changes to capitalist ways of life. Even a “bastion” of capitalism like the US has numerous socialist institutions, including: guaranteed public education, public transportation, fire departments, police departments, public libraries, US military, publicly paid for roads & highways, Social Security, Medicare/medicaid, public hospitals, The Veterans Affairs Administration, public universities,etc. It seems to me socialism along these lines would remake capitalism in the world in positive ways. Why not begin with this smaller leap, and from there perhaps move further if the people desire it. If we attempt the giant leap you suggest, I’m concerned that the whole effort for change may collapse.
Yes, radical, small, isolated and consequently of little or no systemic or paradigmatic significance.
As for the reforms of “guaranteed public education, public transportation, fire departments, police departments, public libraries, US military, publicly paid for roads & highways, Social Security, Medicare/medicaid, public hospitals, The Veterans Affairs Administration, public universities,etc.” they may be aligned with the universalism of the new monetary paradigm but they lack the new insight of the paradigm changing power of the 50% Discount/Rebate monetary policy that enables and creates an entirely new pattern.
Craig, but they are a start down the road to the new monetary paradigm you’re pursuing. Never look a gift horse in the mouth!
Reform and the reformist mindset when an actual paradigmatic solution is available is an unethical act. 5000 years of domination by the current monetary paradigm is long enough.