411. Possible ends of capitalism

Karl Marx predicted that capitalism would break down in revolution. To maintain capitalist profits, a shrinking class of superwealthy would increasingly exploit labour, until the populace rose in revolt. What Marx did not take into account was that innovation, in technology, markets and organization, continually raised labour productivity, which allowed for wage increases without affecting profits. The working class was sucked along in compulsive consumption that further fed profits.

Yet the current situation does resemble Marxist crisis. The ‘occupy’ movement is a manifestation of accumulating frustration and anger concerning the untrammeled, immoral acquisitiveness and opportunism of the 1% richest people, in particular in the financial sector, which makes increasingly disparate gains at the cost of citizens, who carry the risks that banks hive off onto society. Governments allow themselves to be taken hostage by business interests.

The movement seems to have petered out, and there are signs that the financial sector is ready to persist along its path of social destruction. As I indicated before, the alliance between economic logic, vested power interests, and governments that are taken hostage, is difficult to break through.

One scenario now is that tension and popular anger will keep on building up until it indeed does break out in revolution. Present populist protests may augur that.

A second scenario is a crumbling of central government and large business in decentralisation and localization of economic activity, social action, and finance. Such localization has been likened to the Middle Ages (by Alisdair Macintyre).

In finance we see it in the growth of crowd funding, of economic, social and cultural small scale activity, and in ‘Fintec’, the rise of small entrepreneurial activity outside the purview of banks, using new opportunities of digitalisation. Local providers of capital are beginning to deal directly with local entrepreneurs. Any resulting economic disadvantages of small scale, in lesser spread of risks and opportunities, may well be offset by lower risks of default due to local reputation effects and social control.

In social activities we see it in people organizing their own day care for children, care of the homeless and poor, and home care of the old and ill. People cook for people also outside the family. Unemployed set up repair shops. People set up systems for the exchange of used goods. Sometimes services rendered yield credits that can later be used to buy services. These are ways to bypass, to circumvent centralized powers that have gone haywire.

However, we should not romanticize this. There will be increasing inequality between different communities with different intellectual, financial and social capital. The poor communities may be tempted to come and rob the rich ones, which would then set up defences. Perhaps not unlike medieval fortified cities. Local bonzes may accumulate and misuse power, perhaps not unlike medieval barons.

Some remaining central government would be needed to provide safety, control power, and mitigate inequalities. It might be chosen on the basis of representation of local communities, not unlike the ‘states’ of old.

A  third scenario is that present capitalism and economic theory be drastically reformed ‘from inside’, from within the system, to stop market corrosion of the untradeable elements of the good life, break down concentration of economic power, reduce complexity of the system by uncoupling and decentralization, establish a new balance between risk and security, and between autonomy and sociality. However, what earlier (in item 109) I called system tragedy, with established powers of business and institutions holding each other in the deadlock of prisoners dilemmas, on different levels, makes such change from within unlikely. 

So, the most likely end is some form of ‘creative destruction’, in revolution or emergence of new forms outside the dominant system, emerging on a small scale, in a variety of forms that sooner or later will settle down in new dominant forms that are difficult to foresee.

How is capitalism defined?  If we define it as markets plus private ownership of capital, new forms are likely to be new guises of capitalism.