Capitalism is Dead.

The Monstrosity of Capital.

To report the death of capitalism is to exaggerate, to say the least, given we find ourselves subject to austerity measures as the global economy stumbles from one crisis to another in a little under 4 years. In the past capital has been likened to a vampire insofar as it is parasitic in its relation to labour. But it is no longer a suave count as capital is seemingly dead when it comes to the suffering of ordinary people. At the same time it is still capable of violent bursts of energy and it is mindlessly destructive in the pursuit of it's sustenance. So it seems appropriate to describe the current order as zombie capitalism, it requires a minimum of 3% compound growth in order to continue and that translates into a need for profitable investments of $1.5 trillion. In the future the system might demand even more, maybe $3 trillion in growth and we are struggling to find $1.5 trillion right now. One day the banking sector could be so big that it cannot be saved and we will be dragged into the abyss as it collapses. For us to gauge where we are today, and where we might be heading, it is important to remember the causes of the Crash of 2008.

A Popular Capitalism?

As David Harvey has noted, this crisis can be understood if we go back to the crises of the 1970s when organised labour posed a threat to capital. To the extent that the workers' share of GDP peaked in 1967. The unions had demonstrated a capacity to undermine the Establishment in Britain with the fall of the Heath administration in 1974. So the need for a broken labour movement emerged, which gave rise to Thatcher and Reagan to impose such discipline on the working-class. With the full-on assault on organised labour and its political allies came the mobilisation of a global labour surplus; the development of labour-saving technology and increased competition as neoliberalism emerged. The consequence was a sharp decline in the share of wages in total GDP almost everywhere, an enormous disposable labour reserve emerged and survived under marginal conditions. In fact some of the biggest wage-cuts in the world were endured in the US in 1985 and the UK in 1990 which was a direct consequence of the way trade unions were crushed.

The structures of monopoly power was undermined, with the state-monopoly capitalism being displaced in the meantime as the system was opened up to fearsome international competition. Ultimately the intensity of global competition led to lower corporate profits in non-financial domains. The early signs of a hegemonic shift of power towards East Asia came as uneven geographical development and inter-territorial competition had become key factors in capitalist development. The most fluid and mobile form of capital was utilised to reallocate capital resources at a global level, which led to the deindustrialisation in traditional heartlands of industry whilst new forms of industrialisation and resource extraction began in emergent markets. The character of these new forms might be labelled appropriately as ultra-oppressive, for instance in the Congo around 4 million people have been killed for the extraction of coltan. The ultimate aim was to enhance the profitability of financial corporations, thus the need for new ways to absorb risks through the creation of fictitious capital markets.

There is No such Thing as Society.

Accumulation by dispossession became a means to increase class power for the ultra-rich and so a new round of primitive accumulation - against indigenous and peasant populations - was in order to augment the asset losses of the working-classes in the developed world. We have only to turn to the African-American victims of the sub-prime housing crash. The mass-privatisation of social housing in Britain, which took place in the 1980s, appeared as a gift to the working-classes as it enabled them to convert from rental ownership at a relatively low cost to the control of a valuable asset which might make them rich. Speculation soon took over the housing market, eventually pushing low-income earners out to the outskirts of cities. David Cameron is about to further this process as part of a bid to recreate the property boom. It used to be that the capitalist invested in production. But for the last 30 years the economy has underwent financialisation as the capitalist has invested heavily in making money out of money rather than out of anything productive.

The increase of sagging effective demand was accomplished by pushing the debt economy - in governmental, corporate and household spheres - to its limits. This became standard method in the West, so it should be no surprise that in the US the household debt relative to income doubled from 1982 to 2007. By 2007 the ratio of financial assets to GDP had doubled since the early 80s. Incidentally the household debt in the UK was around £1,560 billion in 2010 and may rise to £2,126 billion by 2015 as a result of the cuts. The compensation for anemic rates of return in production came in the construction of a whole series of asset market bubbles and culminated in the property bubble that burst around 2007. Each of these asset bubbles drew upon finance capital and were facilitated by extensive financial innovations, specifically derivatives. The control of assets and resources at the heart of international finance became central to the system in the last 30 years. We no longer make things, we just make money out of money.

There is no Alternative.

The way that the crisis of the 1970s was circumvented led to nearly 16 years of growth in Britain from 1992 to 2008. It led to Gordon Brown claiming that Boom and Bust had been abolished. The current crisis has to be circumvented somehow, in the past that has required the enforced destruction of productive forces, the conquest of new markets and an even more thorough exploitation of old ones. So British manufacturing went into a decline from which it has yet to recover under Thatcher, employment in that area plummeted by 30 years from 1979 to 1990. The very means by which the system regenerates itself typically paves the way for even more extensive and destructive crises, as the means whereby crises are averted are diminished in doing so. The financialisation of the economy led to the financial crises of the last 30 years. The infinite capacity of capitalism to regenerate itself at the expense of the majority of the population should not be underestimated, but with each recovery the foundations for another crisis are laid.

The pressure is on for the ruling class to crank out profitable investments for $1.5 trillion, so it can meet that minimum of 3% growth for the time being. The state's reaction to the crises has opened a door which we're being led through and we don't yet know what is on the other side, it is just a mysterious darkness to us right now. This is nothing new, with the Crash of 1929 came such an opening and we all know what happened in Europe as Germans were marched into the darkness. Then there was the crisis of 1973 in Britain as a result of the oil crisis, which led to the collapse of the Heath government then the pathetic reign of a weak Labour government and then the emergence in 1979 of Thatcherism. This is not cheap fear-mongering, it doesn't seem realistic that either of these will emerge but we have to keep in mind what is possible. We might take comfort in the fact that when the Americans were marched into the same abyss it was the New Deal which emerged and not National Socialism. But it is not necessarily the case that history is on our side.

We're All in this Together.

Capitalisme ou Barbarie?

We find ourselves incapable of even imagining another society, a better world and an alternative to capitalism. It is even easier to imagine the end of the world itself than the end of the capitalist system. The motto of the ideological constellation which currently holds us hostage might as well be a pun on the old socialist saying, instead of "Socialisme ou Barbarie" the capitalist can say "Capitalisme ou Barbarie". As the system can only defend itself at this point as the only way, all other roads have led to barbarism, so we must stick to this last route carved out by the managerial aristocracy on the way to a plutonomous future. According to this view, all the "experiments" with socialism have failed and that proves there is no alternative to capitalism available. Any attempts to change the world are doomed to fail, to descend into totalitarianism and horrors beyond our wildest dreams. In Celsius 7/7 the neoconservative Michael Gove posits Islamism as the new great evil of the world, in line with National Socialism and Communism.

Unsurprisingly, the radical Left is the natural ally of radical Islam in the eyes of Michael Gove and for him both have to be combated. First of all, the presupposition is that the problems of the 21st Century are ethical-cultural (e.g. the right to choose, free-speech, niqabs etc.) and that socio-economic issues have been solved. This in itself is a result of the ideological struggle that has repressed the socio-economic dimension in recent decades. For Gove the Left are simply the purveyors of a backward economics that impoverished and killed millions in the 20th Century. So the economic system is unquestionable, the debate is about freedom which is under threat from Islamism. Even though it was the economic crisis of the early 30s that led to the rise of National Socialism and the sustained deprivation under the Tzars which preceded the Russian Revolution. It can hardly be said that the rise of Islamism is unconnected from the failures and collapse of Arab nationalism, which was dedicated to economic justice along secular lines.

The way that the problem of economics has been submerged is befitting in a world in which capitalist realism is prevalent. Mark Fisher defined capitalist realism as "the view that it is now impossible even to imagine an alternative to capitalism. Capitalism is the only ‘realistic’ political economic system, and, since this is the case, all we can do is accommodate ourselves to it." As a product of the emergence of capitalist realism, we seek to solve societal problems within the narrow framework of which we are allowed to think about change. In the midst of crises we seek refuge in a business ontology, in which everything will be remodeled on the practices and forces of the market. This is what lurks behind the austerity measures which are sweeping the Western world right now. The cuts to public spending are an expression of the inability to even imagine a better world, in Britain we dare not tax the 10% of the population who owns £4 trillion in wealth. Instead we revert to the neoliberal shibboleths of austerity measures, debt reduction and fiscal responsibility etc.

In the 21st Century we have found this extends to health-care, education and warfare, but also as far as terrorism. We ought not forget that al-Qaeda is active in private-terrorism which funded by the Saudi bourgeoisie, Osama bin Laden inherited his wealth from his father - who died in a helicopter crash in 1968 - which would swell through lucrative investments over the years. In other words, the attacks on the World Trade Centre were cross-subsided with money extracted from the stock market as well as the generous donations made to the group by wealthy Arabs who are sympathetic to the cause. Consequently, the military-industrial complex has in turn been able to secure greater and greater funding for the stated purpose of "defence". Due to the interconnected nature of high-tech industry and the military in the US the increased funding functioned as a huge injection of capital into the economy. The convergence of interests which benefited from the attacks then went on to invade Iraq on the basis that the war was necessary to prevent another devastating attack on American soil.

The US had made it out of the Great Depression until the early 40s just as the country began to build up for war as Japan attacked Pearl Harbour in 1941. By 1949 the US government was concerned that the country could fall back into economic depression if the military apparatus was dismantled and so Truman opted for perpetual war for perpetual peace. The military functions as a cover for the state-sector of the American economy and has done for a long time. Since then the US has spent over $7.1 trillion on defence and today the US military budget accounts for 50% of military spending in the world. Incidentally, from the end of the Second World War to today the US has "intervened" in over 70 countries around the world. This has played a vital role in the development of the US as a economic superpower, without it Bill Gates and Steve Jobs may not be so wealthy today. It was massive state-intervention which created the internet and computer technology before it was handed over to the private sector. This is the dirty secret of the American economy.

When reminded that "capitalism works" and "socialism fails" we ought to remind the reactionary  that the system only works as long as 3% compound growth can be attained forever. That if we can just find profitable investments for just $1.5 trillion a year and every year forever, even as the amount rises to $3 trillion and beyond, then we let billions of people slip into poverty and starvation. The Right are sceptical of climate change because it threatens growth ad infinitum but are comfortable with Peak Oil because it seems to be another "obstacle" for capitalism to circumvent in order to go on indefinitely. Suppose climate change is a hoax and the energy crisis can be solved, that will not alter the potentialities of capitalism to push onwards to new crises. We may find ourselves in a position where the banks are too big to bailout and we are dragged kicking and screaming into the darkness of the abyss which we have managed to avoid for so long.

  

At one of his more gloomy moments Karl Marx thought that the class struggle might lead to the "common ruination" of all classes and he did not have the thrill of living in a world of nuclear weapons, chemical warfare and environmental decay. It would seem the infinite growth paradigm is incompatible with a world of finite resources and the ultimate trajectory is fatal in destination. Thus capital is an abstract parasite, an insatiable vampire and a zombie-marker. As Mark Fisher notes "the living flesh it converts into dead labour is ours, and the zombies it makes are us." We are edging ever closer to an unprecedented state of crisis which has been generated by the system and all the while we can envisage the end of the world but not even begin to think about the alternative. The dichotomy of capitalism or barbarism keeps us chained to the status quo. That is the intended goal of those champions of the free-market who cheer on the entrepreneurial spirit of Bill Gates and Rupert Murdoch.

Ayn Rand, Computers and Capitalism.

The first in the series All Watched Over by Machines of Loving Grace was brilliant and marked with the intellectual characteristics of Adam Curtis. The focus of the series is the way in which machines have risen and led us to believe that we could create a stable world that would last forever. Admittedly it is a strange story, it all began with an even stranger woman called Ayn Rand and a philosophy she called Objectivism. The philosophy might be described simply as a highly rigorous form of individualism, essentially meaning that man should put his own happiness first and spend his time improving himself to his utmost potential. He should use common sense and reason in every instance, whilst finding motivation in his own existence. There is no room for altruism and charity in this philosophy. The ideological procedure of Objectivism is an identification with capitalism which is so stringent that it actually undermines the ruling ideology. So we must understand Ayn Rand as part of the tradition of over-conformist authors.

Rand's masterpiece was Atlas Shrugged (1957) was trashed by the critics, even conservatives like William F Buckley called it "ideological fabulism" and distinguished it from The Fountainhead (1943) which he considered to be an engaging book. In spite of this Atlas Shrugged became the bestseller of the century and the most influential book in America second only to the Bible. In the book Rand attacks the idea of altruism head on, she depicts an America in which all aspects of life are controlled and regulated by the government. But then all of the creative individuals who have made America great go on strike and hideout in a remote valley whilst American society collapses. The creative geniuses only emerge to rebuild society after political power has collapsed and the country has descended into an apocalyptic hellhole. The new world which would be born from this would be built without politics and would be based upon the virtue of selfishness.

For the book Ayn Rand returned to a moment from her childhood, when her father went on strike to protest against the Bolsheviks and she imagined the super-rich in America going on strike against the rate of taxation in the US on high-earners. At the time it was 91% on incomes over $400,000 and would be chiseled down to 70% within Rand's lifetime. Though she would not live to see it chopped down to 28% under Ronald Reagan. In her lifetime she saw the rise of social democracy in the US and Bolshevism in Russia, the latter of which left her in an almost permanent state of post-traumatic stress disorder. In fact it could be said that as an intellectual Rand developed in the footprint of the Bolsheviks and only to oppose the fundamental ideals of socialism in order to defend the status quo. Thus, the thorough rejection of equality and descriptions of the masses as "refuse". The influence of Ayn Rand runs deep in American society, her writing has shaped the politics of people like Rand Paul, Glenn Beck and Jimmy Wales. Many of the nouveau riche of Silicon Valley see themselves as Randian heroes and some even name their children after Rand.


In California the idea emerged that political power was no longer needed, instead with the help of computer technology we could all become heroic individuals and an order could be maintained through the networks established by computers. With each individual totally free to follow their desires and each a component in a intricate system. The feedback of information between all individuals connected through computer networks could lead to a system which can stabilise and regulate itself. The experiment by Loren Carpenter supported the thesis that stability and order could be maintained without hierarchy and interference. This meshed well with the Californian ideology which is a combination of the anti-authoritarianism of the Hippie counter-culture with Yuppie techno-utopianism. Nation-states were rendered meaningless as the world had become an interconnected system of individuals and governments should leave the system to spawn a new kind of democracy.

In the first episode it appeared that Adam Curtis is taking a good hard look at fundamental aspects of capitalism, as he has in previous films like The Trap in which he examined freedom in the negative and positive conception. In this series the partial focus is on the idea of a stable system which is self-regulating and has no need for government. The notions of stability and perpetuity are fundamental to capitalism, for it requires 3% compound growth forever and it requires a way of managing crises as it is crisis-prone. Similarly important is the theoretical equilibrium between supply and demand as a direct result of the inherent efficiency of markets. Though supply and demand are actually in a state of perpetual flux. So even if the economists could initiate a change in aggregate supply to balance with aggregate demand it would never meet a perfect balance because demand would have already changed by the time supply had been altered. There is always a disequilibrium in the system.

The future chairman of the Federal Reserve Alan Greenspan was a devotee of Ayn Rand and a loyal member of the Collective - a carefully policed group of intellectuals which had grown around Rand. Years later as chairman of the FED Greenspan met with Bill Clinton and told the President that his election promises of social reform could not be carried out without increasing the deficit, which would lead to higher interest rates and lower rates of growth. Greenspan advised the Clinton administration to slash spending in order to lower interest rates and leave the markets to boom. A boom began in the 1990s and it was believed that it would not end because the rise of computers enabled banks to predict the risk of particular investments and loans. The chaos of the markets might finally be brought to a stable and instantaneous order characterised by unending increase in the rates of productivity and economic growth.

By 1996 it appeared that the US economy had lapsed into irrational exuberance, there was no increase in productivity but profits continued to increase and it appeared that a speculative bubble had been created. But Greenspan buckled to political pressure and argued that the computers were increasing productivity in ways that were so innovative that the data was not picking it up. Around the same time, under pressure from the US countries like South Korea and Thailand jettisoned all constraints on the flow of capital. From the flood of Western capital that followed a huge speculative bubble in property emerged and the capital would flee as the crisis began, leaving the countries devastated. Just as the bubble burst in 1997 and the 'Asian miracle' came to an end the sex scandal engulfed the White House. Here the forces of power and love converged, the dream of a stable world was assaulted. The IMF flew in to the affected countries and stipulated market reforms in the economies in exchange for loans.

After 9/11 and the Enron debacle Alan Greenspan took action to stabilise the economy by repeatedly slashing interest rates to bolster consumption. The consumers would be the mechanism by which the system would be stabilised. In the past such an influx of cheap money into the economy had led to inflation, but it did not in this case and there was a boom over the next several years. The illusory boom gave Western leaders reason to believe that the system can stabilise itself without state-intervention. The Chinese Politburo had come up with a way to manage America, the Politburo deliberately held the exchange rate at a low level to ensure that exports would remain cheap. America was flooded with Chinese goods whilst dollars flooded into China, which were then lent back to the US by buying American bonds. The flow of cheap goods and cheap money created a false stability in America, whilst an orgy of lending and speculation spiraled out of control. The vast property bubble which emerged in the US as a result led to the Crash of '08 and in doing so the dream of perpetual stability were revealed to be totally deluded.

Faith in computers had led the politicians and bankers to believe that the boom would just go on and on no matter what. The machines had brought stability to the system, risk had been removed entirely. The fantasies of Alan Greenspan were exposed as just that in 2008, fantasies predicated on a wave of speculation. The market democracy had not emerged from financialisation and stability had not actually emerged. The banks mobilised political power to receive bailouts and the price for the boom would be paid by the Americans who were least capable of doing so. This also generalises to the austerity measures in Britain and other countries. The total wealth of Britain adds up to around £9 trillion, with the majority of that wealth concentrated in the top 20% of the population and the richest 10% holding £4 trillion in wealth. The cuts will hit the affect of forcing the bottom of 50% of the population, who hold less than 10% of the total wealth, to pay for it. The bottom 10% have less than nothing, negative wealth in the form of debt.

In the midst of the crisis we found ourselves incapable of imagining a better world or even a different system, instead we have opted to recreate the system as it was before the Crash and we have handed our public services the bill to do so. Capitalist realism is the only phrase to describe this state of affairs in which we are embedded. Capitalism is the only realistic system for us and all we can do is adjust to it. A business ontology has become all pervasive, so all areas of social reality are to be reorganised along corporate lines and this extends to everything from forests to health-care. This might help us understand the reawakened fascination in Ayn Rand as the crisis hit in 2008 which, as Slavoj Žižek has noted, came about around the same time that social democratic thought was partially unearthed. We can't even begin to imagine a better world so we merely reinvent the current order in a more radical way, perhaps this is the only message Rand offers to us.

Where's the Theory?!

Comfortable Illusions.

The lack of a theoretical case for the cuts may be indicative of a new era we're entering, a political age without shame, instead of the old hegemony we find blatant domination. Even the Thatcherites had a combination of monetarism and rational expectations in the early 80s to fall back on, it was this combination which Thatcher used to defend a platform of spending cuts and raising interest rates to reduce the money supply. The theoretical framework, from which an economic platform could be defended, could be embellished with gestures of traditionalism and nationalism. For Keith Joseph there was something about the monetarist project which had the aura of a messianic mission, a belief that it could rejuvenate Great Britain and restore the glory of Empire. There is no such clear zeal in this cabinet for a particular theory or even a school of thought, merely a self-proclaimed pragmatic dedication to the national interest.

Really, the Conservative Party are the embodiment of the class-interests of the rich and the practicality of a policy can be measured by how much it affects the wealthy. Thus, the economic strategy laid out by the artful oik George Osborne has no clear theoretical base or even a loyalty to a specific school of thought. The criticism of the British government has come from the IMF and monetarists like Samuel Brittan. There has yet to emerge a clear economic theory in defence of the cuts, all we have had for years now is fear-mongering about the debt that our grandchildren will inherit. Even Larry Summer, the Ariel Sharon of Higher Education, has described the austerity measures as "oxymoronic". Of course, the Right who support these cuts in Britain will remind us that the Obama administration has recently unveiled plans to cut the US deficit at a rate faster than the British. No mention of the incompetence of Geithner. No mention of the role Geithner played in creating the crisis.

Despite what is claimed in the media there is nothing new about government debt, practically all governments work with debt and the logic is one of "return on investment". The government can borrow money to invest in productive capacity to create jobs and stimulate demand, whereby a recovery may be secured and the tax-revenues can increase. The rate of spending in a recession can be justifiably increased along these lines. Keep in mind that the deficit is not the result of "over-spending" as the Tories claim, in a recession tax-revenues go into sharp decline because of rising unemployment and businesses going bust. As the tax-revenues are in decline then spending, which would normally be sustainable, becomes unsustainable and debt is inevitably increased even if the expenditure is not raised. The narratives that the Right are trying to build around the crisis are counter-historical as well as counter-theoretical. The traditional way the economy recovers from a crisis is through spending and borrowing, not by cutting.

The "debt crisis" that the commentariat and the political class are obsessed with is a complete fiction. The current levels of debt are low by historical standards, just take the high estimated 70% of GDP which government debt adds up to and compare it to the 260% of GDP which debt accounted for in 1945. There are alternatives to cutting to decrease the debt, we can boost economic growth through public spending but there are other options as well. We might consider Greg Philo's proposal to implement a wealth tax on the richest 10% of the British population - who have accumulated £4 trillion in wealth. There is a mythology which has been created in the media over the last couple of years, which pins the blame of the deficit on benefit claimants and immigrants in the usual manner. As a proportion of GDP debt repayments were around 7% in 2010 and in 1997 the repayments were around 9%. New Labour paid a lot of debt back and spending was not "out-of-control" under them.

Spawn of Thatcherism.

The management of a deficit typically takes into account major indicators such as growth, interest rates, exports and so on. So the aim of a zero-deficit by 2015 is either a sign of economic illiteracy or cunning on the part of the oik. It is as if Osborne looked at his calendar, saw when the term will run out so he highlighted the date and now we're on track for General Election 2015. This does not smell at all like pragmatism or even business ontology, it could be that the aim is to push the plans ahead as far as possible - before the economy starts to tank and public opposition becomes insurmountable. We might even see a U-turn as seen under George HW Bush on tax-cuts, when his administration saw that the deficit could not be reduced through tax-cuts for the mega-rich. It cost him his second term, but in the case of the Tories and Lib Dems a sudden change in trajectory would probably prolong their stay in government (depending on the details). But it would only provide another opportunity for market reforms and privatisation.

Paradoxically, the spending cuts have the potential to increase the debt as seen in the late 1970s when some economies initiated sweeping cuts to spending. There are only a handful of cases in which austerity measures have promoted growth. Even with the cuts that smashed the British economy in the early 80s, the recovery had little to do with the cuts and a lot more to do with the supply-side stimulus in the United States and financialisation which regimes in South-East Asia at the centre. For the sake of argument, let's assume that the cuts work out and that the economy recovers fully within the next couple of years. The contraction of the economy might only be avoided in such a scenario if aggregate demand is not decimated. The losses in wages could be supplemented through credit, as seen in previous decades, which would necessitate the rise of debt per household.

So here we are one year into what The Times called the Five Year Plan of the Con-Dem Coalition, only the Murdoch press could imply such a tendency in a majority government of neoliberals - the spawn of Thatcherism. We've just lived through Year One and we have already seen protests against the party-line of "CUTS!" with estimates ranging from 500,000 to 850,000 of those who took to the streets on March 29th to demonstrate against austerity measures. All along there had been talks about cuts across the board and market reforms in the usual areas, with Cameron trying to put a 'moderate' stamp on the Conservatives and then a 'progressive' stamp on the Coalition. So that the reheated slop of Blairism can be smuggled into government via the backdoor. Of course, I use the term Blairism to refer to the reinvention of Thatcherism through the mirage of centre-leftism and quasi-evangelical rhetoric of Tony Blair. Now the Con-Dems have used the claims to leftism by New Labour to grind down what remains of the welfare state.

We have seen the beginning of the spending cuts, a sprinkling of privatisation and market reforms, for example health-care reform is still on the table, though attempts to privatise the forests were stopped and cuts in education have been 'moderated' slightly. We've seen Tories talk with glee at the possibility of cuts that Margaret Thatcher could only dream of and we have seen large-scale activism against the austerity measures. Soon the majority of universities will be charging £9,000 and the Institute for Fiscal Studies has predicted that 200,000 children will be pushed into poverty by the cuts. Ironically the plan to reduce public debt by £43 billion could lead to household debt rising from £1.56 billion to £2.13 billion by 2015. So the Rally Against Debt was actually a Rally For Debt. At this point we have to keep going to force the Coalition into compromise just before the axe can be swung again.