The New Year comes with the threat of a serious economic crisis. The plunge in oil prices is causing market instability all over the world with the China’s strange excuse for a stock market on the front line. But we are also in a continuing economic crisis as the middle class shrinks and its finances worsen.
But I’m not the only one that believes this. Here’s Will Hutton writingin the Guardian:
There has always been a tension at the heart of capitalism. Although it is the best wealth-creating mechanism we’ve made, it can’t be left to its own devices. Its self-regulating properties, contrary to the efforts of generations of economists trying to prove otherwise, are weak.
It needs embedded countervailing power – effective trade unions, law and public action – to keep it honest and sustain the demand off which it feeds. Above all, it needs an ordered international framework of law, finance and trade in which it can do deals and business. It certainly can’t invent one itself. Themayhem in the financial markets over the last fortnightis the result of confronting this tension. The oil price collapse should be good news. It makes everything cheaper. It puts purchasing power in the hands of business and consumers elsewhere in the world who have a greater propensity to spend than most oil-producing countries. A low oil price historically presages economic good times. Instead, the markets are panicking.
They are panicking because what is driving the lower oil price is global disorder, which capitalism is powerless to correct. Indeed, it is capitalism running amok that is one of the reasons for the disorder. Profits as a share of national income in Britain and the US touch all-time highs; wages touch an all-time low as the power of organised labour diminishes and the gig economy of short-term contracts takes hold. The excesses of the rich, digging underground basements to house swimming pools, cinemas and lavish gyms, sit alongside the travails of the new middle-class poor. These are no longer able to secure themselves decent pensions and their gig-economy children defer starting families because of the financial pressures.
Capitalism has grown inside the protective cover of the modern nation state and the international accords sought by those states to protect themselves from war and instability. It would seem thatNeoliberalsare contemplating a world in which the nation state is reduced to the same level of just another corporation, in which national laws including those specifying what are acts of criminality are just matters to be negotiated.
I have been sensing unease in the literature over the last few weeks. It is making me uncomfortable. The financial press seems bewildered by economic events that appear without precedent. (The financial press’ view of history never seems to run more than a couple of decades.) Could we be running into another economic crisis? Well, yes, there is almost certainly going to be some kind of downturn in the next twelve months but at what level? The Fed’s silly decision to raise interest rates is going to cause an economic slowdown. But even more troubling is the Royal Bank of Scotland’s predictions for the year. They compare the current situation to 2008. That is very bad indeed.
In economics and banking “speak” this is roughly equivalent to screaming out obscure Bible verses while clutching a “The End is Near” sign.
It seems to me that capitalism can be a positive force in society but that kind of capitalism is not one based on pure financial exploitation or an absence of patriotism or on the opportunity to evade taxes. A positive capitalism is one that creates value not in derivatives but in actual goods and services. A positive capitalism is one in which companies will not seek out their nation’s enemies as profit making opportunities. And finally, a positive capitalism recognizes the contributions of the community in its success and pays its share of taxes to maintain the common welfare.