Jake Berry: Capital Rule

[A response to Jack Random's recent essay: Killing Labor - Beyond the Columbia Free Trade Pact.]

Sometime in the long ago, can we be sure when exactly, Capitalism took control of the global economy. Marx seemed to believe it had already happened, at least in the developed economies, by the time he began writing. Niall Ferguson, in his book, The War of the World, demonstrates in the opening chapter that global capitalism made the world's bounty, whether by manufacture or harvest, available to the average citizen of the British empire at the beginning of the 20th century. Certainly the last three decades have seen an expansion of that global economy to unprecedented proportions. Where Communism, almost always by way of Totalitarianism, held against the tide for several decades, we now witness various hybrid economies. Russia appears to have become a form of nationalized Capitalism. China still clings to Communism for social organization, but has surrendered so thoroughly to Capitalism that not even the poisoning of its own children with contaminated product can be prevented or easily halted. When you consider that the penalty for such excess in China is often the death penalty it is easy to see just how deeply ingrained the system of maximum profit as the primary motive for economic activity has become. Likewise, Vietnam, Nepal, even Cuba are all increasingly capitalistic.

Why then are we not in the Golden Age that the world's leading capitalists predicted? Why has the ascent of Capitalism not been accompanied by the ascent of democracy? The two are halves of the same whole, right? This is the gospel most of us have heard all of our lives. Since the beginning of the Reagan administration it seems the default doctrine underlying all American policy, foreign and domestic. Free trade zones have been opened in all directions. Lately Columbia, and presumably the rest of South America soon, is under pressure to join the party. So then, how could it possibly be that the world's largest economy has slid into it's worst recession since the 70s and totters on the brink of a depression? According to the United Nations, 2008 is the first year since the 1930s that total economic activity has not increased.

What happened? Capitalism is what happened. Capitalism without ethical or legal restraint. At the very moment Capitalism arrived at its greatest expansion it also found itself in peril of total collapse. Any system that functions without competition will invariably consume itself. If the foundation of capitalism is competition what happens when nothing competes with capitalism, not even morality? We are witnessing what happens.

This isn't the first time. There have been cyclic recessions and depressions throughout American history. A notable case is that of the McKinley administration in the 1890s. Finding itself deeply in debt and fearing a depression without end, the administration sought help from some of the wealthiest benefactors of the previous decades of capitalism without restraint. J.P. Morgan and a cadre of his fellow tycoons bought the country out of debt through the purchase of bonds at a highly discounted rate. Once the economy was booming again they sold the bonds at enormous profit. But the collective wealth of all the world’s billionaires cannot buy the economy out of its current crises. $700 billion is beginning to look like a down payment on the abyss.

There were moments during the Great Depression when the general consensus was that Capitalism had run its course. Military spending in Germany and Japan, followed by the war that required an explosion of military spending around the world, put people to work who had never held a job in their lives outside their homes or farms. After the war a combination of preparation for the final war, nuclear holocaust, the arms race, and a demand for consumer items allowed the expansion to continue. Everything was rosy until the fuel ran out in the 1970s. This was too easily remedied by rapidly increasing the import of more expensive fuel from the Middle East and wildly superfluous defense spending. Barring a couple of recessions the economy has continued to grow, aided in part by two waves of technological integration as computers entered the business sector in the 80s and our homes in the 90s.

Unfortunately, there was a downside to all of this. Every generation alive today in virtually every corner of the world can look back to a time when the world seemed simpler, when our demands seemed less urgent and less complicated. In the U.S. we can recall a time when owning a home, a car, a washer and dryer, refrigerator, stove and oven, a television and radio was quite enough. The economics of the American dream were realized for most of a thriving middle class. Then came computers. Interesting tools by themselves for business, design and creativity, but overwhelming when connected to the internet which offers a store of information and entertainment to anyone with a phone or cable line. What was once only available to citizens of the metropolis, if that, is now available to billions. Once again Capitalism succeeded. So what happened? Again, the answer is the thing itself. Capitalism.

Virtually anyone reading this has experienced the discomforts of information saturation. And many of us have asked when observing the continuing arrival of an abundance of products of all kinds in our homes if perhaps we aren't losing something in the bargain. We used to go outside for a walk or to chat with neighbors, now we stare at screens and chat with friends around the world or consume a cornucopia of entertainment in isolation. We wonder what kind of values will result from this level of disconnect from the actual world at our feet.

If these doubts rise in the minds of those of us who have grown up where consumption was the rule, imagine the doubts that arise in the minds of those who have witnessed a much more rapid and aggressive transformation. What if you were born a farmer, or a herder into a nomadic life? A way of life that had been unchanged for thousands of years. Then in the space of a generation your life became urban, consumer and information centered. What might be uncomfortable for us, might feel like an assault to others. When they raise their voice in opposition they discover that they are in the minority. The majority enjoys the new comforts and entertainments. The minorities band together and appeal to the government where an appeal is not met by violence. Eventually they become desperate. They demand a return to the old values. They take to the streets. They riot. They return violence for violence. When this fails they look to the origin of the change and they strike against the governments of those countries, the representatives of those countries and eventually against the citizens of those countries. Mumbai, Madrid, London, New York and Washington and all the others. Their violence is not justified nor is it rational since it will only result in further violence against them, but it is the inevitable result of present circumstances. They are doomed to fail. They are the desperate acts of vanishing cultures.

Capitalism wins. Or does it?

What if capitalists believed so blindly in the power of the market that they believed anything could be measured by market values? What if they believed that all problems could be solved by market forces? What if their faith in the market was so blind that they would even purchase shares in nothing more than a bet on the behavior of the market? What if there was no government, media or any other agency to restrain this blind faith?

Bear witness. Where do these believers go when the markets fail? Who will bear the burden?

Will capitalism survive? Probably, but at what cost? Global bankruptcy? Depression? Global warfare? Environmental catastrophe?

Who will capitalism survive for? If allowed to continue along its present course the global economy will resemble a third world economy with perhaps five percent wealthy and the remainder struggling to survive. The middle class vanishes.

At some point in the last three decades government should have governed, but it did not. Now government is summoned to pay the bill. If that bill is paid without enormous compensation and compromise on the part of capitalism then the governments will continue to fail and falter and disappear.

Imagine corporate feudalism on a global scale where corporate economic agents and militias wage war for the world's resources. If government on behalf of the people and for the people refuses to act aggressively the 21st century may very well look like a high tech version of the Dark Ages.

If Capitalism is the only rule, everybody loses.