May 18, 2013
Steve Fraser on the Crisis of Capitalism
Posted on Nov 6, 2009
By Steve Fraser
Likewise on the intellectual front, the interrogation of capitalism continued for a while after the New Deal years. Joseph Schumpeter, the conservative Harvard-by-way-of-Austria economist who was envious of all the attention paid to Keynes, opened Part II of his recently reissued 1942 book on “Capitalism, Socialism, and Democracy” by asking, “Can capitalism survive?” and immediately answered, “No, I don’t think it can.” Schumpeter championed the entrepreneurial spirit and the process of “creative destruction” which powered technological and social progress, and found Marxist economics intellectually bankrupt. But he, like Marxists and so many other thinkers of that era, wrestled with the internal structural dynamics and contradictions of the economy and accepted the pivotal role of social classes in determining how the system evolved. Most of all, he felt compelled to reckon with the likelihood of alternatives to capitalism, even if he didn’t like them and even if he believed they might triumph thanks to capitalism’s successes, not its failures.
A bit more than a decade later (in 1955) and from the other shore, John Kenneth Galbraith published what is probably still the most popular account of the Great Crash (“The Great Crash, 1929”). Galbraith was there at the creation, working in the Agriculture Department during the earliest years of the New Deal and later on for the Office of Price Administration during World War II. His book, while duly noting the record of greed and incompetence that typified the period leading up to the crash, refused to leave it at that. He looked for underlying causes to explain not only the collapse but why it lasted so long. The last chapter of “The Great Crash” cites the maldistribution of income and the ensuing crisis of under-consumption, deformations in the structure of corporate America which invited the parasitical leeching away of productive investment, vulnerabilities in the banking network, imbalances in global trade and finance that left European and Latin American economies too dependent on the U.S., and finally a government intelligentsia still the captive of “sound money” and “balanced budget” orthodoxies.
In the decades following the publication of “The Great Crash,” Galbraith would come to occupy an increasingly solitary position as the last of the Keynesians; last, that is, in his persistent and probing criticism of the institutional, structural and moral deficiencies of the postwar political economy. Since then, whole lines of thought—socialism, Keynesianism a la père, economic populism—have become endangered species, living on the margins of public life. Losing these languages is crippling, a tragedy really, like losing a limb or a vital brain function. This withering away of the political imagination threatens to turn the great expectations of the Obama victory into a tale of two cities.
Every day the media puts on display the official schizophrenia about the current crisis. On the one hand, recovery beckons; it’s about to start, it’s already started, the crisis is over. People in charge—Bernanke, Geithner, Obama himself—are quoted to this effect. Evidence accumulates mainly in the financial sector, where big banks have so much cash on hand that some have paid back the government its bailout money and others are begging to do so. Profits in the FIRE sector [finance, insurance and real estate] are back, lavish bonuses are back: Can a third gilded age be far behind?
But then there’s the other kind of story, the one about the spreading misery of joblessness, foreclosures, homelessness, wage cuts, furloughs, brute amputations of social services, repossessions, bankruptcies, defaults—the dispossession of a dream. A tale of two cities indeed!
It ought to be seen as appalling, arrogant, callous, myopic, credulous and maybe most of all morally embarrassing to talk with a straight face about recovery amid all this. What could that word possibly mean; why don’t the bankers, their house intellectuals and the always deferential media choke on the word as they utter it? Who exactly is recovering? What, after all, is the whole point of economic recovery if it doesn’t first of all mean some improvement in general well-being? What is it that licenses this official complacency, which, in a kind of reassuring afterthought, notes that unemployment and other downbeat news may linger for a while, even quite a while, may even grow for a while, or for quite a while, but then again looks at Goldman Sachs and takes heart?
What allows for this is a long generation of financialization of the economy. Among the many lamentable legacies of that profound economic makeover is this kind of moral and cultural numbness. Economic good health, the notion of prosperity itself, has for a long time now been identified with how things are faring for the banks, the insurance companies, the hedge and private equity funds, their law firms and the legions of satellite enterprises that service that sector. This was always delusional, not just after Bear Stearns and Lehman Brothers sent up their distress signals.
The standard of living for broad stretches of Middle America has stagnated or declined for 30 years and more; that is to say, during the reign of high finance. After all, the de-industrialization of the heartland has been under way for a very long time, leaving behind ghost towns and human wreckage. The ballyhooed prosperity of those decades was always a hollow one, hiding inside an uglier truth detectable in shuttered factories and moribund unions, in national health and educational indices that left the United States trailing badly when compared with much of the rest of the industrialized world, in grotesque inequities in the distribution of wealth and income last seen nearly a century ago, in the treadmill race of two wage earners trying to bring home an income to match what used to be made by one, in its shoddy and sometimes lethally neglected bridges and flood walls and slow-motion trains, in its growing dependence on low-wage, sweated labor, both immigrant and native-born, in the “booming” retail and service sectors, in the way its mass consumption rested on the super-exploitation of working people in the global south, and what finally proved to be an insupportable burden of debt here at home.
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