The dreaded “C” word is making its reappearance as commentators and economists alike openly question whether it’s capitalism as a system that’s in the mire rather than merely the banks or the euro.
When even the BBC is asking pundits whether “Western capitalism” has failed the day after large-scale falls on share markets, you know something is up.
And when Will Hutton, the former editor of The Observer and well-known reformer, says that “the way capitalism has been conceived and practised for the last 30 years has hit the buffers”, things must be really bad.
Others who earn their living directly from the system, like economist George Magnus who is senior adviser to highly-troubled Swiss investment bank UBS, are more explicit, writing recently:
It is a crisis of capitalism because our economic model and policy settings cannot produce sustainable growth, adequate income formation or employment creation. We have lost the housing, financial services and credit creation growth drivers and been left with excessive levels of personal and government debt to unwind, a dysfunctional financial system, and weak labour markets.
The capacity to produce and sell goods and services has outstripped that of consumers to borrow and spend. Without credit and jobs, other fault lines have been exposed, including the long stagnation of real wages and extremes of inequality. It is truly a crisis of aggregate demand.
While the acknowledgement that there is something fundamentally wrong with the present system of production and exchange, aka capitalism, is welcome, that’s as far it goes. Magnus, like Hutton, believes that the system can be reformed through intervention. Hutton advocates what he calls “good capitalism” brought into being by the actions of “democratic government” with the alternative being the “worst economic contraction for a century”.
A leopard cannot change its spots, however. And nor can capitalism. The globalisation process that accelerated following the breakdown of what now seems to Hutton and company a more reasonable, post-war capitalism cannot be put into reverse. Not by governments, not by the European Central Bank or the International Monetary Fund or the World Bank. And certainly not by Cameron, Obama, Merkel, Sarkozy et al.
Inherent contradictions of capitalism drove the transition from a managed economy to transnational corporations more powerful than national states and a global financial system to fund the expansion that accompanied huge increases in productivity.
The driving down of wages as a share of national income is well documented as capital expanded, moving production to cheaper labour areas, undermining local trade union bargaining power. So too is the fact that capitalism in the developed countries was no longer able to provide full employment as the technological revolution kicked in.
Yet the goods produced had to be sold to realise the profit they contained. And if workers couldn’t buy them out of earnings and savings, why endless credit would do the trick. And so it came to pass that the world was flooded with credit and debt, and that endless growth was here to stay (no matter if it destroyed the planet in the process).
Governments deregulated everything that moved and privatised what they could. The financial system went into an orbit where money seemed to create even more money.
No longer did we live under capitalism, New Labour told us. A paradigm shift had occurred.
Well, yes it had. But it was not the pain-free paradise that everyone was promised. Behind the spending frenzy was the slow-burn of the explosion of the very system of production and finance that New Labour and others had Merlin-like magicked out of existence.
There is no mystery about the solution. A system of production that is driven by co-operation has to replace the profit drive. The means of production already exist that can satisfy most human needs. Their ownership and control is simply in the wrong, shareholding hands.
The political class, experts and assorted advisors have no answers, not least because the crisis has spun out of control, driven by a self-generated momentum. Social, revolutionary change to put capitalism out of business is down to us.