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Society, Politics & Law

Capitalism: Beyond repair or awaiting a fix?

Updated Friday 3rd October 2014

The 2008 financial crisis still thrums underneath political debate six years on - have we missed a chance to rework capitalism? Does it even need such fundamental repair?

Laurie Taylor:
Graffiti musing on the temporary nature of capitalism Creative commons image Icon Dominic Alves under CC-BY licence under Creative-Commons license As a post-graduate I used to attend lectures given by an Eastern European sociologist, I've pretty well forgotten most of the content but I can still recall the degree of venom which he managed to inscribe into the pronunciation of "capitalist" – all four syllables were carefully separated so as to indicate the full extent of his distaste, it was never capitalist but always cap-i-ta-list!

Well present day critics hardly need such endorsement – such vocal endorsement of their concerns about this particular economic system, they can find as much support as they need in the dozens of critical accounts of contemporary capitalism which have appeared in the wake of the 2008 financial crisis.

Well in this programme I'm going to be talking to the distinguished authors of two such accounts. David Harvey, who's professor of anthropology and geography at the City University of New York, and author, most recently, of Seventeen Contradictions and the End of Capitalism and Colin Crouch, professor emeritus of governance and public management at the University of Warwick and author most recently of Making Capitalism Fit for Society.

 

But let's begin with just a very brief reminder of the 2008 crisis which prompted, or further confirmed, the views of capitalism's critics:

 

News report:
The collapse of one of America's biggest investment banks has sent shockwaves around the world. Share prices have plummeted and thousands of jobs are in jeopardy.

The world's money markets have not seen a day like it perhaps since the Great Depression. The decision by Lehman Brothers, the fourth biggest investment bank in the United States, to file for bankruptcy late last night sent shockwaves around the globe. Shares have plummeted, billions wiped off their value.

Laurie Taylor:
A dying dong. Colin Crouch, we've just been reminding ourselves of that economic crisis and one we're still struggling to emerge from, I mean from your point of view is there anything particularly striking about that crisis and its consequences, compared to those we've experienced before?

Colin Crouch:
It probably is striking in that it was global and it started off in the Anglo American financial system and then spread out gradually to large parts of the world. In previous crises either these things have been restricted to regions, like the various Latin American debt crisis, the Asian debt crisis, or going back to the truly international crisis of the inter-war years the world that participated in the one global economy was rather smaller. So the sheer size and scale of it was distinctive. In other respects it bears a similar – a resemblance to those other crises in that a lot of irresponsible financial speculation and with resolutions of the crisis that end up rewarding most those people who are most involved in producing it.

Laurie Taylor:
Yes I mean that little – that little question of inequality – in wealth inequality – that looms that quite largely in your account, doesn't it, of growing inequality of wealth?

Colin Crouch:
Yes wealth and income. We are living now in a rather unusual period in that gradual modernisation of economies is associated with increasing inequality. Historically that's unusual. At the present time the United States, which is the leader in this development, has levels of inequality similar to those of third world countries, looks more like Africa or parts of Latin America, whereas normally the advanced countries usually have lower rates of inequality than elsewhere.

And inequality matters because inequality of wealth and income can be translated into political power. And Tony Blair used to say it doesn't matter if someone's got three yachts if you've got a car, and that's quite a reasonable thing to say but it does matter if someone can buy a government and increasingly the holders of vast wealth are lobbying heavily so that they are virtually buying governments and therefore pushing policies even more in their interests which then creates even more inequality.

So the fact that material inequality translates into inequalities of power that is so worrying about it.

Laurie Taylor:
Yeah I mean it is that important translation. Something that I remember Joseph Stiglitz making a rather similar point in one of his books. Let me turn to you, David Harvey, now what would you want to add about this last crisis which perhaps was new or was particularly striking?

David Harvey:
I don't think the inequality thing is anything that strikes me as being central. In the history of capitalism inequality has yo-yoed back from back and forth. And in fact you could sort of say that the inequality levels now – in the United States for example – are very similar to those that occurred in the 1920s.

What is I think different is something that Colin mentioned is the size and scale of this crisis and for me we should pay attention to that because getting out of something that's very localised and small, say a crisis in 1848 in Paris or something, is one thing, getting out of a crisis of the size and scale that we're now facing when we're actually looking at a global economy which is enormous in its width and depth then that seems to me to pose very, very serious unique problems and I don't think we're finding answers to it.

I'm very struck by the fact that in this crisis no new thinking has really come forward as to where we shall go, we either go back to what we did in the 1930s or we deepen what we've been doing since the 1970s, we haven't got, as it were, a different way to go.

Laurie Taylor:
The suggestion is really that we're not finding any resolution to crises. I mean of course if we go back to Marx, Marx talks about almost these crises being essential arising necessarily from the contradictions within capitalism. Let's just remind ourselves of what Marx had to say:

Karl Marx (reading):
In the crises of the world market the contradictions and antagonisms of bourgeois production are strikingly revealed. Instead of investigating the nature of the conflicting elements, which erupt in the catastrophe, the apologists content themselves with denying the catastrophe itself and insisting in the face of their regular and periodic recurrence that if production were carried on according to the textbooks crises would never occur.

Laurie Taylor:
I suppose I just want to say to you though David, but we do hear every time a financial crisis occurs that okay I mean there are people on the left who say oh capitalism's coming to an end, here we go, at least, this is the final….I mean somehow the crises are dealt with, I mean maybe with severe effects to the living standards of many people, whatever, but somehow we get over the crisis. I mean this morning we learn, gosh, economic growth is going up in the UK – how wonderful, we're beating France, we're doing well, we're on the road to recovery. That seems to be a familiar pattern. Is this a crisis – it's not a crisis to end all crises – but is this something particularly striking?

David Harvey:
I think the way I would put it is this: That crises are actually catalytic moments when capitalism reforms itself, as it did in the 1930s, as it did in the 1970s. The question is how's it going to reform itself this time? And that's why I go back to the question: Why is there no new thinking about how to get out of this particular crisis? Which suggests there may be something going on which is rather different from what was going on before.

Laurie Taylor:
And to what extent, Colin, do you buy into this idea that there is something about capitalism which – these contradictions which are going to produce constantly these crises until the entire system can no longer function?

Colin Crouch:
Well it's odd because it's that very prone-ist to contradiction which then leads to new outcomes that is both the strength and the weakness of capitalism. So if we look at the state socialist system, that had no capacity to innovate, no capacity for parts of the system to regenerate while others decline. And so when it came to its huge crisis it did just collapse as an entire system.

And capitalism, time and time again, has shown it has a flexibility that means often its contradictions and crises actually produce innovation, either in thinking about the economy or in product innovation. And so you have to be careful not to right the thing off.

On the other hand – and this is very similar to what David Harvey has just said – you don't know what kind of animal will emerge. At the present time what I regard as the most worrying thing is not anything in the actual economy – world economy – itself but the fact that virtually everywhere, from Finland to Greece, from Japan to Britain, populist xenophobic foreigner hating forces are gathering strength. That to me is what could be a new ugly re-emergence.

Laurie Taylor:
David though we are talking about this as being something about this crisis which is different, I mean one of the things that you I think would want to point to was that we are now seeing particular problems relating in relationship to growth, compound growth. We were talking about we can grow our way out of this latest economic crisis but you want to suggest there are now new limits upon the possibility of that?

David Harvey:
I think there are – we are at an inflection point in capital's history where sustaining growth at a compound rate of 3% per annum for the whole global economy becomes more and more difficult.

And I think we see some real stresses already emerging over the last 20 or 30 years that so much capital has actually gone into the acquisition of assets and into speculation and asset values rather than into production, it's gone into fictitious forms of capital formation and I think that – that trend – is very strong and what we're seeing is a revival of that trend, if we look at, for example, what's been happening in property markets – we had a crisis in property markets, what's happening now – the London property market is bubbling like crazy, same in Manhattan, same in Sao Paolo, same in Hong Kong and we're actually – I mean in China, of course, there's a huge property market bubble.

So bubble economy is something which we seem to be moving into as the solution – the only solution – that anybody can really find.

Laurie Taylor:
You see a limit on capitalism's ability to find new markets to generate growth?

Colin Crouch:
Well we don't know, I mean what David says is right, and I would add to his point that another way in which they're trying to find new ways of making profits is to sell off what we've always seen as our inheritance, the public goods – education, health services, care services – these are all now being hived off to private firms to make profits from.

At the same time one does see other things going on and the growth of China and some other parts of the Asian economy has produced new large middle classes who are starting to buy goods from the Western economies and from Japan and so we see Italian leather and goods and smart clothing, even cars made in Britain, certainly a lot of machinery made in Germany going to these new markets.

We're beginning to get some of the benefits from globalisation. So I don't really think the system has run out of all its energies yet.

Laurie Taylor:
David?

David Harvey:
Well there are still possibilities, I mean there are still open markets but I still would argue that if you look at the way in which money is rushing into what we called a land grab in Africa, purchasing land assets, resources and all the rest of it, we're moving into a kind of economy which is becoming a rentier economy, that people just want to live off rents not actually making anything and that doesn't seem to me to be a very healthy kind of state for capitalism to move into.

Laurie Taylor:
Now I remember – goodness knows how many years ago – but I do remember I was listening to a religious radio programme, probably on Radio Luxemburg, and it was called Frank and Ernest and it consisted of Frank asking Ernest leading questions such as: "Now tell me Ernest why is there so much suffering in the world?" And Ernest giving the pat replay: "Well Frank God has endowed humans with the gift of freewill, so they may choose to be good or evil."

Well no such ready answers to questions about the state of the world are available in political science. But I'm now going to ask my two guests to offer some possible solutions to the problems that they were identifying.

Let me come to you first of all, Colin, I mean you want to reject what might be called the neo-liberal view that society's at its best when markets are given free reign, instead you're calling for a renewed and more assertive social democracy as a way out for some of the problems we outlined earlier. Unpack that for me – what do you mean by that?

Colin Crouch:
I do accept part of the neo-liberal agenda which says that we improve large areas of life by increasing markets, especially if it would break down some of the monopolies that we have in the private sector today. But we need to remember always that when you make markets you also make some damage, that people are affected negatively by markets.

Sometimes this damage just has to be accepted but sometimes we say no there needs either to be compensation for damage, there needs to be protection from the damage, there needs to be restitution of some kind. So whenever you make markets you need to have strategies that say what do we now do about the damage. So, for example, if you make labour markets more flexible you create more insecurity in people's lives, that's some damage produced by the market.

So what do you do about that? Do you – is it about unemployment pay, is it about training, is it about other areas of policy? Now what's happening at the present time is that the market driven agenda is saying just more market, more market, more market, people aren't saying and because we're saying more market we therefore need to look very seriously at the compensatory and regulatory processes.

And historically that politics has been the role of social democracy or in this country we call it Labour Party. And it – my view is that we need at the present time more of that approach, it needs to think about new kinds of policies, new ways of dealing with new kinds of market damage, especially those concerning climate change rather than being seen as a kind of dustbin of history that's been pushed aside by the adopting of ever more market without compensation.

Laurie Taylor:
So more state intervention in terms of dealing with inequities of income, dealing with matters like pollution and the environment and the restoration, if you like, of public goods?

Colin Crouch:
Partly that, partly for the state to intervene not perhaps to do things itself but just to make space for people to do other things. I'm thinking in particular at the moment of a very typical contemporary problem, it's called work/life balance, it's also work/family balance – the enormous difficulties people are having juggling two jobs in family with the need to bring up perfectly educated children.

Enormous amount of stress around that. Now the state can't help people directly do that but it can do various things that makes it easier for them to manage those problems. Also something else that is in decline, my own work is mainly concerned with labour markets and insecurities there, and we know that certain kinds of trade unions can be extremely important in protecting and helping people dealing with their problems of insecurity at work. At the moment they're declining, they need to have greater strength. So it's not just the state but the state's pretty central to helping make the space we need.

Laurie Taylor:
Let me turn to David. Actually that work/life balance – I remember you using that as an indication – as an example of a contradiction at the beginning of your book. How do you respond to this package of proposals?

David Harvey:
Well for me neo-liberalisation was never about markets. Markets were the means and they're a means to something and what they're a means to was the accumulation of capital and the accumulation of capital in fewer and fewer hands. And one of the thesis that comes out of Marx, which I think is very important, is that the closer you get to a free market economy the greater the concentration of wealth at the top.

And of course what the Occupy movement did was to draw attention to what's the wealth concentration of the top 1%? And we have now responsible people other than radicals like me kind of talking about we actually are faced with a situation of a global plutocracy….

Laurie Taylor:
We've got the IMF and the OECD…

David Harvey:
…even saying – even saying this has gone to the point now where there's such a concentration of wealth and power. But that's what it was all – what neo-liberalisation for me was about from the very beginning, it was a strategy to do that and I think when people call for further cuts, like austerity, we notice immediately that the people who've come out of the crash of 2007-2008 with actually an enhanced situation right now are the top 1%, everybody else has essentially suffered.

Laurie Taylor:
But how would – how might one deal with that? I mean a French economist – Thomas Piketty – who I'm sure you both know who's been attracting a lot of attention with his proposed solutions to these great disparities in wealth. I mean here he is on the BBC World Service in March this year:

Thomas Piketty on the BBC World Service:
I think we live at a period where wealth is extremely prosperous relative to income, so it makes sense to have less taxation of income and more taxation of wealth. So these are things that individual countries, to some extent, can do on their own but if we think of the top global wealth individual countries need to coordinate a lot more than what they do now if they really want to fight tax haven and have an effective policy.

Laurie Taylor:
How do you respond to this idea of having countries cooperating to have a capital wealth tax?

David Harvey:
I love his accent by the way, I think it's fantastic. So I think – yeah – I mean this is a utopian proposal, we know that the top 1% is not going to allow that to happen, we see the Republican Party in the United States absolutely against that. And it's a sort of a nice idea but for me you really have to lock that idea not simply into redistribution of wealth but also into the decommodification of many aspects.

For instance, the way we have commodified higher education so that students now come out indebted and indebted and indebted, we've got to roll all that back and we've got – and that's something that's not associated with wealth tax, it's something that could be done pretty much overnight if we really wanted to do it, so developing what I would call the use value aspect of society as opposed to is insisting everything be delivered through this exchange value system which actually then ends up costing a lot of people and giving great profits to that small 1%.

Laurie Taylor:
And Colin?

Colin Crouch:
I like that example of what's been done to higher education. By making students need more and more money to finance their education they're being encouraged, explicitly, I mean there's no secret about this, the government's quite open about this, they're being encouraged to see their education in terms of what it might bring them in income later on.

This leads them to be extremely instrumental about how they study, it leads them to be extremely deferential so that education is losing the notion of discovery, inquiry, challenge and criticism that is fundamental actually to a dynamic society.

And while on the one hand we're being told but we want more entrepreneurs actually what we're doing in the higher education system is turning out a load of extremely dutiful yes men and women.

Laurie Taylor:
Now you're producing I mean some analyses of the sort of the ills of society, I'm not quite certain though if we're going to change – if we're going to do something to remedy these ills - what the agent of transformation is going to be. I mean are you suggesting in terms of your social democracy that we need – what – a political party which is going to go back to the idea of much more emphasis upon public good, it's going to go back to much more emphasis upon the role of the trade unions, I mean is it through democratic intervention, a new party, a reform of the present Labour Party?

Colin Crouch:
I find most of the people who read what I write about these things tend to be active in campaigns – citizens' movements of various kinds – and they're thinking that civil society outside of formal politics can be an agent. And what – I say to them two things, one I say yes, in the last analysis we as citizens are the ones who have to take ultimate responsibility. If our politicians are corrupt we are the ones who have to criticise them. If our banks are irresponsible we are the ones who have to take the action.

But you can't do that outside of the state. And you need government – you therefore need political parties. And so although parties and civil action movements are groups that have their own contradictory relationships, they hate each other, they actually need each other. Without civil society you get a lazy somnolent political class that just sells itself out to big business without political parties you can't really get leverage of the state.

Laurie Taylor:
David, coming round to you as a Marxist, I mean your agent of transformation was typically the industrial working class.

David Harvey:
Well the industrial class – I've never been a great fan of that particular piece of dogma in the Marxist canon. But I think – I agree in principle with what Colin's saying but we've got to recognise that there's a widespread alienation right now of people from the political process, they just don't trust because democracy is essentially the democracy of money power.

And everybody recognises that and I think therefore there's a frustration with politics, there's a tendency to go into civil institutions too civil but that very often is around a kind of notion of rights and complaining about being victims of something or other and I don't like the politics of complaining about being victimised. But what we are seeing of course is essentially this whole set of urban uprisings, I mean just in the last year you have Taksim Square, Gezi Park in Istanbul, of course you have everything that's been going on in Egypt, there was eruptions in Stockholm, about 50 odd cities in Brazil were kind of just in total turmoil, people are taking to the streets and actually if you look over the last 30 years you'll see a tremendous volatility, outbreaks of anger, which suggests to me that there's widespread alienation everywhere in the world with how this system is working.

And right now it has not found a new way of doing politics, there's a search on for a new way of doing politics which is not traditional parties, it's not vanguard parties of the typical Communist party thought and it's not kind of trying to reform the Labour Party or trying to reform the Democratic Party, it's going to say we're got to find something completely different.

Laurie Taylor:
David Harvey and Colin Crouch, thank you both very much.

By the way if you're inclined towards revolutionary solutions do get your slogans right – I can still recall the hilarity engendered among spectators by one of the banners on a late '60s demo, it read: "Paris, London, on to Cairo – the sword is mightier than the biro."

 

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