Wolfgang Streeck, How Will Capitalism End?, Verso, 2016.
Paul Mason, Post-Capitalism: A Guide to Our Future, Penguin Books, 2016.
Dollars, euros, Swiss francs, renminbi, yen, even bitcoins are established global currencies. But the 21st century economy is also oriented on a new currency — data. In an example of how the things are changing, a contemporary monopoly does not necessarily seek to capture a market and then exploit customers via inflated prices, but instead can funnel its control of information into other ancillary businesses. Google, for instance, accounts for some 90 percent of global internet searches, but there is no indication they plan to begin charging for that service anytime soon.
Government regulators already face difficulty in applying existing anti-trust law to sprawling tech companies. The economic game has changed even if the rules have not, and it is no longer a political statement to say that the capitalism as we understand it is dying. The bestseller Capital in the Twenty-First Century by French economist Thomas Piketty has diagnosed challenges posed by growing inequality, and thinkers continue to take their shot at analyzing what might come next — and how.
German sociologist Wolfgang Streeck calls our current state of affairs the “post-capitalist interregnum,” and his new book How will Capitalism End? steps beyond Picketty’s pure economic case towards politics. Meanwhile, Post-Captialism: A Guide to Our Future by British journalist Paul Mason connects macro-economic shifts to the ongoing information revolution, and is hopeful that technology might also offer solutions to our economic ills. Both leave the reader, even one who disagrees with their larger theses, with little doubt about how much global economics have changed in the past four decades.
The arc of Streeck’s collection (largely comprised of earlier essays and lectures) and Mason’s book, which came out in 2015 but has just been re-released in paperback, largely match. The present global economic system— neoliberalism—represents a distortion of earlier, more sustainable forms of capitalism. While Streeck confesses that he is unsure of how the world will formally move away from capitalism, Mason attempts to map out what a transition to a new kind of economy might look like.
Mason defines neoliberalism as “the doctrine of uncontrolled markets.” This is marked as distinct from earlier eras where organized labor and democratic elections helped to limit and cushion against market turmoil. In latter-day capitalism, the best way to reach prosperity is for individuals to unabashedly pursue their own self-interest. Those interests are expressed via markets where people compete against one another. In the purest incarnation of this vision, markets take on a utopian character as something close to living beings themselves. Not only are they self-regulating, but they deliver more efficiently than any imaginable alternative.
Unfortunately, only a complete ideologue can contend that this still holds true. As the 2008 financial crisis amply demonstrated, profiting on financial markets is not necessarily connected to growth in the real economy and deregulated investment banking can actually be a very poor mechanism for efficiently distributing capital to where it is most productive. Other examples of traditional market-thinking breaking down abound. Wikipedia is much more efficient than encyclopedias that were sold as retail products. Wikipedia’s creation, maintenance, and distribution is not market-driven — and it has in fact eliminated the encyclopedia market altogether.
Streeck, like Mason, argues that capitalism as a functioning economic system largely lost its way during the 1970s. In this view, the post-World War II boom period is an anomaly rather than something to be extrapolated indefinitely. In fact, it is the attempt to do so that has helped lead to our current predicament. Streeck tracks the evolution of capitalism over the past century and a half. First, liberal capitalism was confronted by radical workers in the late 19th century, leading to a combination of repression and social reforms in the form of democratic power sharing. Next, capitalism was coopted by states for World War I. After the war, liberal economics returned but failed to deliver to most people and gave rise to fascism and communism. In the places where capitalism proves successful after World War II, and in the years that it did succeed, markets were checked by the democratic welfare-state.
Now we begin to run into trouble as growth slows and social-democratic capitalism begins to disintegrate in the 1970s, giving way to neoliberalism. Mason points to what he calls the four contradictions of neoliberalism: fiat money, financialization, global imbalances, and information technology. To start with, money was decoupled from gold and companies turned to open markets rather than banks for capital as consumers directly joined financial markets themselves by accumulating debt. This more or less borrowing had the effect of prolonging the post-war boom for a few more decades, but that model has now reached its breaking point, both authors contend.
In the United States—the heart of neoliberalism— the effects are most statistically measurable, but the pattern also holds elsewhere. Between 2001 and 2008 the global money supply grew from $25 trillion to $70 trillion, much faster than the real economy. Another $12 trillion has been created via quantitative easing since then. Under normal conditions rising money supply is a sign of optimism that the future will be wealthier than the present, but that is not what economic models nor popular wisdom—a significant drive of markets—predict.
In fact, slow growth is matched by rising inequality, both globally and within individual societies. Since 1973, real wages of American production workers have stagnated, debt in the economy has doubled to 300 percent of GDP and the percentage of GDP produced from finance, insurance, and real estate has jumped from 15 to 24 percent.
The American political scientist Jeffrey Winters has calculated what he calls a “Material Power Index.” Using pre-crisis data from 2007 he compared the top 400 US taxpayers with the bottom 90 percent. He found a material power ratio of 10,327 to one. A version using 2004 statistics comparing the top 100 households by income with the bottom 90 percent was even more shocking. Discounting home value, the wealthy had greater material power at a ratio of 108,765 to one — similar to the discrepancy between a senator and a slave at the height of the Roman Empire.
Streeck connects this drift toward debt and stagnant wages to the breakdown of working class solidarity. This quickly reasserts the political elements of his case. By atomizing workers—just 7 percent of private sector workers in the United States are unionized, the lowest proportion since the early 1930s—neoliberalism has removed the regulatory function democracy served on unchecked markets.
“Globalization has moved the sweatshops that Marx and Engels and the factory inspectors of the 19th century found in Manchester to the capitalist periphery,” Streeck writes. This has the effect of physically separating the Western middle classes from low wage workers abroad, negating a natural political alliance. “They never meet, do not speak the same language nor experience together the community and solidarity deriving from collective action,” Streeck adds.
Not only are low wage outsourced workers and the Western working class no longer allies, but they are increasingly pitted against another as enemies. The consumerist push for cheap goods pushes down wages and accelerates the offshoring of jobs. Either the jobs move abroad, or lower-cost labor is imported. The resulting concerns are articulated by political parties labeled as “populist,” often a code name for racist, a label that is further used to delegitimize the grievances of this political constituency, Streeck argues.
All this talk of inequality and workers’ rights is sure to bring the response that Streeck and Mason are simply rehashing 20th century leftist thinking. While they certainly approach the issue from the political left, there are no illusions that things can be fixed by simply turning back the clock. Marx provides a good theory of history, but not a very good explanation for economic crisis, Mason argues. Communism was indisputably worse than capitalism, he adds.
“Capitalism, as it turns out, will not be abolished by forced march techniques,” Mason writes in a nod to the horrors of 20th century leftist dogma. “It will be abolished by creating something more dynamic that exists at first within the old system.”
Though Streeck sticks much closer to a traditional critical sociological look at the flaws of neoliberalism, Mason—like many who would argue that capitalism can be adapted to a new era—maintains a particular focus on technology as a potentially transformative force for good. “Information is different from every previous technology,” he writes.
Mason argues that information technology has reduced the need to engage in traditional forms of work, that information goods corrode the market’s ability to regulate prices, and that emerging collaborative production models disrupt normal economic hierarchies. Even things that appear to epitomize capitalism may not.
For example, the Apple iTunes store does not operate within traditional capitalist economic parameters. Prices are not determined by supply and demand, both concepts that are predicated on scarcity. Not only is the supply of a single song in the form of an MP3 file essentially infinite, but cost to the customer does not fluctuate based on demand. Furthermore, Apple incurs no additional production costs whether it sells one, two, or 2 million copies of the song. Apple sets the price and then relies on copyright law and artificial scarcity of its own creation to enforce it. Limiting competition is not only a mechanism for boosting profits, but the entire business model.
Apple would point out that they are not the only ones to benefit from this business model, that it helps record companies, artists, and any number of other companies stay in business too. This may well be true, but that is not the same thing as fitting into any sort of traditional Hayekian model of free market competition. To Mason, examples like this point to distortions that are already in play. “Whole swaths of economic life are beginning to move to a different rhythm,” he writes, citing Wikipedia and others as the more positive examples of the phenomenon.
The so-called sharing economy offers an “escape route” from the punishing inequality, not to mention the relative inefficiency of the current economic system. “Collaborative production, using network technology to produce goods and services that work only when they are free, or shared, defines the route beyond the market system,” he writes.
For his part, Streeck is equally certain that change is coming, but less convinced that technology is the avenue for this change. Today’s social networks encourage four main behaviors— coping, hoping, doping, and shopping—none of them good and all of them prop-up rather than challenge neoliberalism. He notes how proponents of today’s tech-driven economy have appropriated language to their cause. Disruption, a word that has long had negative connotations, has now somehow become synonymous with innovation. Things that are not disruptive are not innovative or profitable enough.
“Capitalism promises infinite growth of commodified material wealth in a finite world,” Streeck writes, and indeed most long-term economic surveys find the 20th century growth to be the exception, not the rule. One study by economic historian J. Bradford DeLong (not a leftist sympathizer) found that between the invention of rock tools 3 million years ago and the year 1800, global economic growth averaged 0.00002 percent per year.
However, advocates of capitalism would contend that these same numbers prove the superiority of their system with the post-war boom as evidence. In other words, capitalism and now the neoliberal model itself managed to crack the code for perpetual growth. These sobering surveys by Mason and Streeck separate recurrent patterns from irreversible change and leave little doubt that the latter prevails today. Belief that pre-2008 neoliberalism is the way forward borders on the religious in that it is not rooted in empiricism.
Mason tries to argue for the transformative potential of technology, but for all the discussions of merits he never quite hones in on how networked economics would completely displace markets. In the end, we end up back at politics as the primary tool to solve contemporary ills. If data itself is a new currency—or alternatively a commodity, as “data is the new oil” goes one trendy aphorism—it is seemingly one that can be produced indefinitely and thus not finite. During the post-capitalist interregnum a great amount of that currency is controlled and hoarded by the powerful few. This necessarily shifts the discussion towards power and not raw economics per se.
Neither Streeck nor Mason set a clear map of where we are going, but each provides a convincing sketch of where we stand now. They also lay bare the assumption that capitalism, and specifically neoliberalism, can or will continue indefinitely. There is nothing permanent, organic, or inevitable about capitalism, and indeed the 2008 financial crisis forces a rethink of how we organize economically and politically. As the Italian philosopher Antonio Gramsci put it: “The crisis consists precisely in the fact that the old is dying but the new cannot yet be born.”
Today’s collision of economic distortions and accelerating technological change is already altering human relations in ways that run counter to traditional market-oriented thinking. There is no guarantee of a smooth reconciliation, and indeed disruption may yet maintain its negative connotation.
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