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Don't Believe The Debt Ceiling Hype: The Federal Government Can Survive
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http://www.nationalreview.com/articles/214240/capitalisms-boil/william-f-buckley-jr
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The moral crisis of modern capitalism
In a column written just a few years before his death, Buckley condemned what he called the “institutional embarrassments” of capitalism, CEOs whose enormous compensation packages defy the gravitational pull of poor stock performance. Buckley was no egalitarian, and he drew a contrast between the “executive plunder” reaped by certain CEOs and the allowances that may be made for the likes of a Thomas Edison. Were such a person alive today, he said, “it would be unwise to cavil at any arrangement whatever made by a company seeking his services exclusively.”
Unwise, but more importantly, unwarranted, for at the heart of Buckley’s argument is an appeal to fairness. It does not seem unreasonable that a Thomas Edison, or a Steve Jobs, be paid a lot more than the rest of us. But when it comes to people who not only fail to create value, but actually supervise its destruction, it seems outrageous that they should make more over a long lunch than most people make in an entire year. Or, as Buckley puts it, “What is going on is phony. It is shoddy, it is contemptible, and it is philosophically blasphemous.”
Paul Krugman has famously called this period The Great Divergence. “We’re no longer a middle-class society, in which the benefits of economic growth are widely shared,” he said in the inaugural post of his New York Times blog. “Between 1979 and 2005 the real income of the median household rose only 13 percent, but the income of the richest 0.1 percent of Americans rose 296 percent.” During the same period, the percentage of the nation’s wealth held by the top 1 percent grew from 20.5 percent in 1979 to 33.8 percent in 2007. These trends have helped to set the U.S. apart from other developed countries in terms of wealth inequality. According to the C.I.A World Fact book, the U.S. currently ranks 39th in unequal wealth distribution, edging out Cameroon and Iran but just behind Bulgaria and Jamaica. By contrast, the UK comes in at 91st place, with Canada 102nd and Germany 126th.
From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.
The inequality within the financial sector is more striking still, with the most successful managing directors taking home enough to buy and sell a brace of lowly associates. Again, the numbers speak for themselves: In 1986, the highest paid CEO on Wall Street was John Gutfreund of Salomon Brothers, who made $3.1 million. In 2007, the CEO of Goldman Sachs, Lloyd Blankfein, made just short of $68 million.
The Quiet Coup - Simon Johnson - The Atlantic
The Wall Street–Washington Corridor
Of course, the U.S. is unique. And just as we have the world’s most advanced economy, military, and technology, we also have its most advanced oligarchy.
In a primitive political system, power is transmitted through violence, or the threat of violence: military coups, private militias, and so on. In a less primitive system more typical of emerging markets, power is transmitted via money: bribes, kickbacks, and offshore bank accounts. Although lobbying and campaign contributions certainly play major roles in the American political system, old-fashioned corruption—envelopes stuffed with $100 bills—is probably a sideshow today, Jack Abramoff notwithstanding.
Instead, the American financial industry gained political power by amassing a kind of cultural capital—a belief system. Once, perhaps, what was good for General Motors was good for the country. Over the past decade, the attitude took hold that what was good for Wall Street was good for the country. The banking-and-securities industry has become one of the top contributors to political campaigns, but at the peak of its influence, it did not have to buy favors the way, for example, the tobacco companies or military contractors might have to. Instead, it benefited from the fact that Washington insiders already believed that large financial institutions and free-flowing capital markets were crucial to America’s position in the world.
One channel of influence was, of course, the flow of individuals between Wall Street and Washington. Robert Rubin, once the co-chairman of Goldman Sachs, served in Washington as Treasury secretary under Clinton, and later became chairman of Citigroup’s executive committee. Henry Paulson, CEO of Goldman Sachs during the long boom, became Treasury secretary under George W.Bush. John Snow, Paulson’s predecessor, left to become chairman of Cerberus Capital Management, a large private-equity firm that also counts Dan Quayle among its executives. Alan Greenspan, after leaving the Federal Reserve, became a consultant to Pimco, perhaps the biggest player in international bond markets.
These personal connections were multiplied many times over at the lower levels of the past three presidential administrations, strengthening the ties between Washington and Wall Street. It has become something of a tradition for Goldman Sachs employees to go into public service after they leave the firm. The flow of Goldman alumni—including Jon Corzine, now the governor of New Jersey, along with Rubin and Paulson—not only placed people with Wall Street’s worldview in the halls of power; it also helped create an image of Goldman (inside the Beltway, at least) as an institution that was itself almost a form of public service.
Wall Street is a very seductive place, imbued with an air of power. Its executives truly believe that they control the levers that make the world go round. A civil servant from Washington invited into their conference rooms, even if just for a meeting, could be forgiven for falling under their sway. Throughout my time at the IMF, I was struck by the easy access of leading financiers to the highest U.S. government officials, and the interweaving of the two career tracks. I vividly remember a meeting in early 2008—attended by top policy makers from a handful of rich countries—at which the chair casually proclaimed, to the room’s general approval, that the best preparation for becoming a central-bank governor was to work first as an investment banker.
A whole generation of policy makers has been mesmerized by Wall Street, always and utterly convinced that whatever the banks said was true. Alan Greenspan’s pronouncements in favor of unregulated financial markets are well known. Yet Greenspan was hardly alone. This is what Ben Bernanke, the man who succeeded him, said in 2006: “The management of market risk and credit risk has become increasingly sophisticated. … Banking organizations of all sizes have made substantial strides over the past two decades in their ability to measure and manage risks.”
Of course, this was mostly an illusion. Regulators, legislators, and academics almost all assumed that the managers of these banks knew what they were doing. In retrospect, they didn’t. AIG’s Financial Products division, for instance, made $2.5 billion in pretax profits in 2005, largely by selling underpriced insurance on complex, poorly understood securities. Often described as “picking up nickels in front of a steamroller,” this strategy is profitable in ordinary years, and catastrophic in bad ones. As of last fall, AIG had outstanding insurance on more than $400 billion in securities. To date, the U.S. government, in an effort to rescue the company, has committed about $180 billion in investments and loans to cover losses that AIG’s sophisticated risk modeling had said were virtually impossible.
Wall Street’s seductive power extended even (or especially) to finance and economics professors, historically confined to the cramped offices of universities and the pursuit of Nobel Prizes. As mathematical finance became more and more essential to practical finance, professors increasingly took positions as consultants or partners at financial institutions. Myron Scholes and Robert Merton, Nobel laureates both, were perhaps the most famous; they took board seats at the hedge fund Long-Term Capital Management in 1994, before the fund famously flamed out at the end of the decade. But many others beat similar paths. This migration gave the stamp of academic legitimacy (and the intimidating aura of intellectual rigor) to the burgeoning world of high finance.
As more and more of the rich made their money in finance, the cult of finance seeped into the culture at large. Works like Barbarians at the Gate, Wall Street, and Bonfire of the Vanities—all intended as cautionary tales—served only to increase Wall Street’s mystique. Michael Lewis noted in Portfolio last year that when he wrote Liar’s Poker, an insider’s account of the financial industry, in 1989, he had hoped the book might provoke outrage at Wall Street’s hubris and excess. Instead, he found himself “knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share. … They’d read my book as a how-to manual.” Even Wall Street’s criminals, like Michael Milken and Ivan Boesky, became larger than life. In a society that celebrates the idea of making money, it was easy to infer that the interests of the financial sector were the same as the interests of the country—and that the winners in the financial sector knew better what was good for America than did the career civil servants in Washington. Faith in free financial markets grew into conventional wisdom—trumpeted on the editorial pages of The Wall Street Journal and on the floor of Congress.
From this confluence of campaign finance, personal connections, and ideology there flowed, in just the past decade, a river of deregulatory policies that is, in hindsight, astonishing:
• insistence on free movement of capital across borders;
• the repeal of Depression-era regulations separating commercial and investment banking;
• a congressional ban on the regulation of credit-default swaps;
• major increases in the amount of leverage allowed to investment banks;
• a light (dare I say invisible?) hand at the Securities and Exchange Commission in its regulatory enforcement;
• an international agreement to allow banks to measure their own riskiness;
• and an intentional failure to update regulations so as to keep up with the tremendous pace of financial innovation.
The mood that accompanied these measures in Washington seemed to swing between nonchalance and outright celebration: finance unleashed, it was thought, would continue to propel the economy to greater heights.
In a column written just a few years before his death, Buckley condemned what he called the “institutional embarrassments” of capitalism, CEOs whose enormous compensation packages defy the gravitational pull of poor stock performance. Buckley was no egalitarian, and he drew a contrast between the “executive plunder” reaped by certain CEOs and the allowances that may be made for the likes of a Thomas Edison. Were such a person alive today, he said, “it would be unwise to cavil at any arrangement whatever made by a company seeking his services exclusively.”
Unwise, but more importantly, unwarranted, for at the heart of Buckley’s argument is an appeal to fairness. It does not seem unreasonable that a Thomas Edison, or a Steve Jobs, be paid a lot more than the rest of us. But when it comes to people who not only fail to create value, but actually supervise its destruction, it seems outrageous that they should make more over a long lunch than most people make in an entire year. Or, as Buckley puts it, “What is going on is phony. It is shoddy, it is contemptible, and it is philosophically blasphemous.”
Paul Krugman has famously called this period The Great Divergence. “We’re no longer a middle-class society, in which the benefits of economic growth are widely shared,” he said in the inaugural post of his New York Times blog. “Between 1979 and 2005 the real income of the median household rose only 13 percent, but the income of the richest 0.1 percent of Americans rose 296 percent.” During the same period, the percentage of the nation’s wealth held by the top 1 percent grew from 20.5 percent in 1979 to 33.8 percent in 2007. These trends have helped to set the U.S. apart from other developed countries in terms of wealth inequality. According to the C.I.A World Fact book, the U.S. currently ranks 39th in unequal wealth distribution, edging out Cameroon and Iran but just behind Bulgaria and Jamaica. By contrast, the UK comes in at 91st place, with Canada 102nd and Germany 126th.
From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.
The inequality within the financial sector is more striking still, with the most successful managing directors taking home enough to buy and sell a brace of lowly associates. Again, the numbers speak for themselves: In 1986, the highest paid CEO on Wall Street was John Gutfreund of Salomon Brothers, who made $3.1 million. In 2007, the CEO of Goldman Sachs, Lloyd Blankfein, made just short of $68 million.
The Quiet Coup - Simon Johnson - The Atlantic
The Wall Street–Washington Corridor
Of course, the U.S. is unique. And just as we have the world’s most advanced economy, military, and technology, we also have its most advanced oligarchy.
In a primitive political system, power is transmitted through violence, or the threat of violence: military coups, private militias, and so on. In a less primitive system more typical of emerging markets, power is transmitted via money: bribes, kickbacks, and offshore bank accounts. Although lobbying and campaign contributions certainly play major roles in the American political system, old-fashioned corruption—envelopes stuffed with $100 bills—is probably a sideshow today, Jack Abramoff notwithstanding.
Instead, the American financial industry gained political power by amassing a kind of cultural capital—a belief system. Once, perhaps, what was good for General Motors was good for the country. Over the past decade, the attitude took hold that what was good for Wall Street was good for the country. The banking-and-securities industry has become one of the top contributors to political campaigns, but at the peak of its influence, it did not have to buy favors the way, for example, the tobacco companies or military contractors might have to. Instead, it benefited from the fact that Washington insiders already believed that large financial institutions and free-flowing capital markets were crucial to America’s position in the world.
One channel of influence was, of course, the flow of individuals between Wall Street and Washington. Robert Rubin, once the co-chairman of Goldman Sachs, served in Washington as Treasury secretary under Clinton, and later became chairman of Citigroup’s executive committee. Henry Paulson, CEO of Goldman Sachs during the long boom, became Treasury secretary under George W.Bush. John Snow, Paulson’s predecessor, left to become chairman of Cerberus Capital Management, a large private-equity firm that also counts Dan Quayle among its executives. Alan Greenspan, after leaving the Federal Reserve, became a consultant to Pimco, perhaps the biggest player in international bond markets.
These personal connections were multiplied many times over at the lower levels of the past three presidential administrations, strengthening the ties between Washington and Wall Street. It has become something of a tradition for Goldman Sachs employees to go into public service after they leave the firm. The flow of Goldman alumni—including Jon Corzine, now the governor of New Jersey, along with Rubin and Paulson—not only placed people with Wall Street’s worldview in the halls of power; it also helped create an image of Goldman (inside the Beltway, at least) as an institution that was itself almost a form of public service.
Wall Street is a very seductive place, imbued with an air of power. Its executives truly believe that they control the levers that make the world go round. A civil servant from Washington invited into their conference rooms, even if just for a meeting, could be forgiven for falling under their sway. Throughout my time at the IMF, I was struck by the easy access of leading financiers to the highest U.S. government officials, and the interweaving of the two career tracks. I vividly remember a meeting in early 2008—attended by top policy makers from a handful of rich countries—at which the chair casually proclaimed, to the room’s general approval, that the best preparation for becoming a central-bank governor was to work first as an investment banker.
A whole generation of policy makers has been mesmerized by Wall Street, always and utterly convinced that whatever the banks said was true. Alan Greenspan’s pronouncements in favor of unregulated financial markets are well known. Yet Greenspan was hardly alone. This is what Ben Bernanke, the man who succeeded him, said in 2006: “The management of market risk and credit risk has become increasingly sophisticated. … Banking organizations of all sizes have made substantial strides over the past two decades in their ability to measure and manage risks.”
Of course, this was mostly an illusion. Regulators, legislators, and academics almost all assumed that the managers of these banks knew what they were doing. In retrospect, they didn’t. AIG’s Financial Products division, for instance, made $2.5 billion in pretax profits in 2005, largely by selling underpriced insurance on complex, poorly understood securities. Often described as “picking up nickels in front of a steamroller,” this strategy is profitable in ordinary years, and catastrophic in bad ones. As of last fall, AIG had outstanding insurance on more than $400 billion in securities. To date, the U.S. government, in an effort to rescue the company, has committed about $180 billion in investments and loans to cover losses that AIG’s sophisticated risk modeling had said were virtually impossible.
Wall Street’s seductive power extended even (or especially) to finance and economics professors, historically confined to the cramped offices of universities and the pursuit of Nobel Prizes. As mathematical finance became more and more essential to practical finance, professors increasingly took positions as consultants or partners at financial institutions. Myron Scholes and Robert Merton, Nobel laureates both, were perhaps the most famous; they took board seats at the hedge fund Long-Term Capital Management in 1994, before the fund famously flamed out at the end of the decade. But many others beat similar paths. This migration gave the stamp of academic legitimacy (and the intimidating aura of intellectual rigor) to the burgeoning world of high finance.
As more and more of the rich made their money in finance, the cult of finance seeped into the culture at large. Works like Barbarians at the Gate, Wall Street, and Bonfire of the Vanities—all intended as cautionary tales—served only to increase Wall Street’s mystique. Michael Lewis noted in Portfolio last year that when he wrote Liar’s Poker, an insider’s account of the financial industry, in 1989, he had hoped the book might provoke outrage at Wall Street’s hubris and excess. Instead, he found himself “knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share. … They’d read my book as a how-to manual.” Even Wall Street’s criminals, like Michael Milken and Ivan Boesky, became larger than life. In a society that celebrates the idea of making money, it was easy to infer that the interests of the financial sector were the same as the interests of the country—and that the winners in the financial sector knew better what was good for America than did the career civil servants in Washington. Faith in free financial markets grew into conventional wisdom—trumpeted on the editorial pages of The Wall Street Journal and on the floor of Congress.
From this confluence of campaign finance, personal connections, and ideology there flowed, in just the past decade, a river of deregulatory policies that is, in hindsight, astonishing:
• insistence on free movement of capital across borders;
• the repeal of Depression-era regulations separating commercial and investment banking;
• a congressional ban on the regulation of credit-default swaps;
• major increases in the amount of leverage allowed to investment banks;
• a light (dare I say invisible?) hand at the Securities and Exchange Commission in its regulatory enforcement;
• an international agreement to allow banks to measure their own riskiness;
• and an intentional failure to update regulations so as to keep up with the tremendous pace of financial innovation.
The mood that accompanied these measures in Washington seemed to swing between nonchalance and outright celebration: finance unleashed, it was thought, would continue to propel the economy to greater heights.
It seems on today's society only those who have not are concerned or care about those who have!
It's a free society GO GET YOURS FOLKS and cease to concerns about what "others" have collated from years of hard work whether it be millions or billions.
It's their money not yours or mine, and providing they follow "the rules" promulgated by the federal government, those whom remark with a sense if pre-morbid expediency appear as whiners and nothing more.
It's a free society GO GET YOURS FOLKS and cease to concerns about what "others" have collated from years of hard work whether it be millions or billions.
It's their money not yours or mine, and providing they follow "the rules" promulgated by the federal government, those whom remark with a sense if pre-morbid expediency appear as whiners and nothing more.
Jim I make over 10x the average house hold income 8 years into my career and it goes up every year. I've taken my piece and then some. I could just sit here saying fuck everyone else - what do I care? But the fall of the middle class will eventually hit me since the middle class makes up 98% of patients. Theoretically if this goes on long enough and the middle class disappears I have no one to pay me and I make less. Now as I said this may not happen to any significant extent in my life time but that is the inevitable end of capitalism. Maybe not in the next 20 or 50 or 100 years but it's a flawed system. The take all you can anyway you can doesn't work when there's a finite amount of wealth in the world....
“Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.” — Kenneth Boulding, economist.
“This sucker could go down.” – George W. Bush, 9/25/08
Capitalism requires growth. A system that requires growth cannot last forever on a planet that is defined by ecological and social limits. Capitalism is therefore fundamentally unsustainable – sooner or later it will run up against those limits and the system will stop functioning. At this moment we are in the midst of a crisis which is calling into question the future of this system. Now is a perfect opportunity to envision a new way of living in the world that can meet human needs while also respecting the needs of the planet. It is time to build this new world.
The current economic crisis which began in 2007 is unlike any previous crisis faced by global capitalism. In earlier downturns there remained a way to grow out of it by expanding production – there were new resources and energy supplies, new markets, and new pools of labor to exploit. The system just needed to expand its reach, because there was plenty of money to make outside its existing grasp. If we study what lies at the root of today’s crisis, we will discover very real limits to growth blocking that path this time. From extreme poverty alongside excessive consumption to exhaustion of resources and ecosystems, the system’s capacity for growth has reached a breaking point. The present economic recession might not be recorded in the history books as the final chapter of capitalism. But the ongoing crisis illustrates that like Humpty-Dumpty, the capitalist system is broken and there’s no sense continuing to use all the King’s horses and all the King’s men to try to put it back together again. It would be wiser to spend those resources developing an economy that works better for our communities and our planet.
Contrary to what may be reported in the news, this is not merely a financial crisis. Professor Richard Wolff in his excellent video Capitalism Hits the Fan explains that this crisis did not begin in the financial markets and it hasn’t ended there. When the corporate media cast blame for the recession on abstractions like “toxic assets,” “collateralized debt obligations,” “credit default swaps,” or focus discussion of the problem on the crimes and errors of individual investors and firms, they obscure the true depth of the crisis. This is a crisis of the system itself, meaning the only solution is a total change in the structure of the economy.
Capitalism cannot be “fixed,” it must be replaced. Despite unprecedented efforts on the part of the King’s men, who have spared no expense on his recovery, Humpty remains in critical condition today and his long-term prospects are not looking good. Journalist and former Goldman Sachs executive Nomi Prins has been tracking the extent of the Wall St. bailout, and reported in December ’09 that the US government has in the past year committed over $14 trillion to buy up worthless debt from troubled banks. (Putting this in perspective, the entire yearly economy of the United States is also $14 trillion.) Despite these unprecedented giveaways, businesses continue to close their doors or downsize their workforces, pushing the official US unemployment rate over 10% as of November ’09. But this number only includes those jobless workers who are currently looking for full-time employment. A more accurate figure, including the underemployed and those discouraged from actively seeking employment would be 17.5%, or nearly 1 of every 5 American workers out of a job.
While the US Congress quickly gave out trillions of dollars to banks and corporations facing hardship, it has thus far created no new job training or unemployment programs to ease the suffering of the millions of workers losing their incomes. Nor does it appear willing to create a public health care program for the nearly 50 million Americans now without access to a doctor. At the same time the US government continues to drag its feet on the issue of climate change, recently joining with China to “wreck” the Copenhagen climate summit (in Bill McKibben’s words) that was attempting to curb global greenhouse gas emissions. Such favoritism towards banks and corporations while neglecting the basic well-being of the public and the planet reflects the sickness of capitalist priorities. In this system, profit is valued more highly than human and non-human life.
Capitalism requires growth, and according to an article published in New Scientist, growth is “killing the Earth.” The article included the below graph, showing the size of the global economy (GDP) skyrocketing over the last fifty years. But this tremendous growth in economic output corresponds to an equally rapid growth in damage done to the global environment. Forest loss, fisheries depleted, ozone destruction, species extinctions, carbon dioxide emissions, and the rise of global temperatures all race towards the top of the page, suggesting that if capitalism were able to recover from its current fall and continue on a path of endless growth, there soon might not be any planet left to live on.
Capitalism is killing the planet. Click the image for more detail.
Capitalism is killing the planet. Click the image for more detail.
Luckily for Earth and all those who call it home, there are limits constraining capitalism from further growth. These limits are both ecological and social because they originate both from the planet and communities of people. The ecological limits include shrinking supplies of water, soil, uranium, and fossil fuels like oil, natural gas, and coal. The most important limiting factor is oil, which fuels much of the capitalist economy, including 95% of current transportation. Global capitalism today could not exist without oil, but worldwide oil production appears to be near its ultimate maximum, or “peak.” Peak oil doesn’t mean that there is no more oil, just that the oil remaining underground is deeper, heavier, more remote, and more expensive – so it cannot continue to be pumped at the same rate as before. As demand for oil continues to grow, this supply limit is creating a shortage that cannot be overcome by existing alternative fuels, which has sent oil prices soaring. And without the cheap and plentiful fuel it needs to grow, capitalism as a way of organizing society will become obsolete.
Social limits are the other side of the story, and here we see a conflict between the wealthy elite who manage global capitalism and everybody else whose needs are not being met by the system. The growth of the system therefore tends to benefit only the prosperous few, and people all across the world are working together to resist it and build a new world. Capitalism’s hunger for growth reached its highest level with the doctrine of corporate globalization (or “neoliberalism”). Corporate globalization meant allowing the free transfer of wealth across the entire planet, uniting the world in one giant market so that banks and corporations would face no boundaries to maximum profits. Naomi Klein explains in her excellent book The Shock Doctrine how in the pursuit of profit, elites reduced wages by moving factories to poorer countries, privatized social services like public water systems, and dismantled laws that protect the environment. This doctrine threatened jobs in wealthy countries like the US while simultaneously polluting and pillaging poor countries in Latin America, Africa and Asia, often called the Global South.
The injustice of corporate globalization provoked a powerful response called the Global Justice Movement. Starting in the 1990s the Global Justice Movement mobilized millions of people to take action against this project by making it impossible for elites to hold meetings without facing overwhelming protest. Corporate schemes were discredited and institutions promoting them were driven from many countries that had previously embraced them. Latin America reacted especially strongly and moved in a much more progressive direction, epitomized by the election of Evo Morales, the first-ever indigenous President of Bolivia and an outspoken critic of capitalism. Today, the defeat of the project of corporate globalization is most apparent in the irreparable damage done to its flagship institution, the World Trade Organization (WTO), whose negotiations have totally collapsed under the refusal of Global South nations to compromise further. The lesson of this upsurge of powerful social movements is that the system cannot rule us without our consent. By joining hands and naming its injustices, regular people can defeat capitalism’s increasingly desperate attempts to expand its exploitation of communities and the planet.
As capitalism faces its limits, a new economy based on fundamentally different ecological and social relationships must replace it. Will this new reality will be more democratic, more free, more just, and more sustainable than life under capitalism? We can’t know. The answer will in large part be determined by what we do. Will we succumb to fear over the loss of wealth or privileges? If so we may allow ourselves to be led into something far worse. This path could end at a kind of neo-fascism – a militarization of society to keep Humpty going, regardless of the cost. Or conversely will we be guided by love, of life, of each other, and of ourselves? If so it is entirely possible to build a new way of life that restores humanity to a healthy balance with nature, while reinvigorating the core values that make life meaningful – freedom, democracy, justice and sustainability. We could develop a society that values us, based not on the profits of a few but on meeting the needs of all, planet included.
To reach this destination we must cultivate ways of viewing the world that are both common-sense, or based on our lived experiences and inner knowledge rather than imposed by outside formulas, and radical, meaning going to the root and discovering the hidden forces beneath the surface of reality. A common-sense radicalism would recognize the immense potential that lies within human beings, such as our ability to create, to listen, to live in balance with our surroundings, to solve problems collectively, and most importantly: to change. Such a perspective would necessarily question any system that hinders or restricts such natural abilities, and seek to liberate human potential so that we can better care for our planet and our communities.
A common-sense radical approach should also inform us that we cannot heal others until we begin to heal ourselves, from the social and ecological trauma we have endured under capitalism. The first step on that healing journey is to educate ourselves so we can name the problem as capitalism. Naming the source of the trauma opens up our imagination to the immense possibilities that lie beyond it. Our imagination is the source of all real hope for the future. Only we can unleash it.
“This sucker could go down.” – George W. Bush, 9/25/08
Capitalism requires growth. A system that requires growth cannot last forever on a planet that is defined by ecological and social limits. Capitalism is therefore fundamentally unsustainable – sooner or later it will run up against those limits and the system will stop functioning. At this moment we are in the midst of a crisis which is calling into question the future of this system. Now is a perfect opportunity to envision a new way of living in the world that can meet human needs while also respecting the needs of the planet. It is time to build this new world.
The current economic crisis which began in 2007 is unlike any previous crisis faced by global capitalism. In earlier downturns there remained a way to grow out of it by expanding production – there were new resources and energy supplies, new markets, and new pools of labor to exploit. The system just needed to expand its reach, because there was plenty of money to make outside its existing grasp. If we study what lies at the root of today’s crisis, we will discover very real limits to growth blocking that path this time. From extreme poverty alongside excessive consumption to exhaustion of resources and ecosystems, the system’s capacity for growth has reached a breaking point. The present economic recession might not be recorded in the history books as the final chapter of capitalism. But the ongoing crisis illustrates that like Humpty-Dumpty, the capitalist system is broken and there’s no sense continuing to use all the King’s horses and all the King’s men to try to put it back together again. It would be wiser to spend those resources developing an economy that works better for our communities and our planet.
Contrary to what may be reported in the news, this is not merely a financial crisis. Professor Richard Wolff in his excellent video Capitalism Hits the Fan explains that this crisis did not begin in the financial markets and it hasn’t ended there. When the corporate media cast blame for the recession on abstractions like “toxic assets,” “collateralized debt obligations,” “credit default swaps,” or focus discussion of the problem on the crimes and errors of individual investors and firms, they obscure the true depth of the crisis. This is a crisis of the system itself, meaning the only solution is a total change in the structure of the economy.
Capitalism cannot be “fixed,” it must be replaced. Despite unprecedented efforts on the part of the King’s men, who have spared no expense on his recovery, Humpty remains in critical condition today and his long-term prospects are not looking good. Journalist and former Goldman Sachs executive Nomi Prins has been tracking the extent of the Wall St. bailout, and reported in December ’09 that the US government has in the past year committed over $14 trillion to buy up worthless debt from troubled banks. (Putting this in perspective, the entire yearly economy of the United States is also $14 trillion.) Despite these unprecedented giveaways, businesses continue to close their doors or downsize their workforces, pushing the official US unemployment rate over 10% as of November ’09. But this number only includes those jobless workers who are currently looking for full-time employment. A more accurate figure, including the underemployed and those discouraged from actively seeking employment would be 17.5%, or nearly 1 of every 5 American workers out of a job.
While the US Congress quickly gave out trillions of dollars to banks and corporations facing hardship, it has thus far created no new job training or unemployment programs to ease the suffering of the millions of workers losing their incomes. Nor does it appear willing to create a public health care program for the nearly 50 million Americans now without access to a doctor. At the same time the US government continues to drag its feet on the issue of climate change, recently joining with China to “wreck” the Copenhagen climate summit (in Bill McKibben’s words) that was attempting to curb global greenhouse gas emissions. Such favoritism towards banks and corporations while neglecting the basic well-being of the public and the planet reflects the sickness of capitalist priorities. In this system, profit is valued more highly than human and non-human life.
Capitalism requires growth, and according to an article published in New Scientist, growth is “killing the Earth.” The article included the below graph, showing the size of the global economy (GDP) skyrocketing over the last fifty years. But this tremendous growth in economic output corresponds to an equally rapid growth in damage done to the global environment. Forest loss, fisheries depleted, ozone destruction, species extinctions, carbon dioxide emissions, and the rise of global temperatures all race towards the top of the page, suggesting that if capitalism were able to recover from its current fall and continue on a path of endless growth, there soon might not be any planet left to live on.
Capitalism is killing the planet. Click the image for more detail.
Capitalism is killing the planet. Click the image for more detail.
Luckily for Earth and all those who call it home, there are limits constraining capitalism from further growth. These limits are both ecological and social because they originate both from the planet and communities of people. The ecological limits include shrinking supplies of water, soil, uranium, and fossil fuels like oil, natural gas, and coal. The most important limiting factor is oil, which fuels much of the capitalist economy, including 95% of current transportation. Global capitalism today could not exist without oil, but worldwide oil production appears to be near its ultimate maximum, or “peak.” Peak oil doesn’t mean that there is no more oil, just that the oil remaining underground is deeper, heavier, more remote, and more expensive – so it cannot continue to be pumped at the same rate as before. As demand for oil continues to grow, this supply limit is creating a shortage that cannot be overcome by existing alternative fuels, which has sent oil prices soaring. And without the cheap and plentiful fuel it needs to grow, capitalism as a way of organizing society will become obsolete.
Social limits are the other side of the story, and here we see a conflict between the wealthy elite who manage global capitalism and everybody else whose needs are not being met by the system. The growth of the system therefore tends to benefit only the prosperous few, and people all across the world are working together to resist it and build a new world. Capitalism’s hunger for growth reached its highest level with the doctrine of corporate globalization (or “neoliberalism”). Corporate globalization meant allowing the free transfer of wealth across the entire planet, uniting the world in one giant market so that banks and corporations would face no boundaries to maximum profits. Naomi Klein explains in her excellent book The Shock Doctrine how in the pursuit of profit, elites reduced wages by moving factories to poorer countries, privatized social services like public water systems, and dismantled laws that protect the environment. This doctrine threatened jobs in wealthy countries like the US while simultaneously polluting and pillaging poor countries in Latin America, Africa and Asia, often called the Global South.
The injustice of corporate globalization provoked a powerful response called the Global Justice Movement. Starting in the 1990s the Global Justice Movement mobilized millions of people to take action against this project by making it impossible for elites to hold meetings without facing overwhelming protest. Corporate schemes were discredited and institutions promoting them were driven from many countries that had previously embraced them. Latin America reacted especially strongly and moved in a much more progressive direction, epitomized by the election of Evo Morales, the first-ever indigenous President of Bolivia and an outspoken critic of capitalism. Today, the defeat of the project of corporate globalization is most apparent in the irreparable damage done to its flagship institution, the World Trade Organization (WTO), whose negotiations have totally collapsed under the refusal of Global South nations to compromise further. The lesson of this upsurge of powerful social movements is that the system cannot rule us without our consent. By joining hands and naming its injustices, regular people can defeat capitalism’s increasingly desperate attempts to expand its exploitation of communities and the planet.
As capitalism faces its limits, a new economy based on fundamentally different ecological and social relationships must replace it. Will this new reality will be more democratic, more free, more just, and more sustainable than life under capitalism? We can’t know. The answer will in large part be determined by what we do. Will we succumb to fear over the loss of wealth or privileges? If so we may allow ourselves to be led into something far worse. This path could end at a kind of neo-fascism – a militarization of society to keep Humpty going, regardless of the cost. Or conversely will we be guided by love, of life, of each other, and of ourselves? If so it is entirely possible to build a new way of life that restores humanity to a healthy balance with nature, while reinvigorating the core values that make life meaningful – freedom, democracy, justice and sustainability. We could develop a society that values us, based not on the profits of a few but on meeting the needs of all, planet included.
To reach this destination we must cultivate ways of viewing the world that are both common-sense, or based on our lived experiences and inner knowledge rather than imposed by outside formulas, and radical, meaning going to the root and discovering the hidden forces beneath the surface of reality. A common-sense radicalism would recognize the immense potential that lies within human beings, such as our ability to create, to listen, to live in balance with our surroundings, to solve problems collectively, and most importantly: to change. Such a perspective would necessarily question any system that hinders or restricts such natural abilities, and seek to liberate human potential so that we can better care for our planet and our communities.
A common-sense radical approach should also inform us that we cannot heal others until we begin to heal ourselves, from the social and ecological trauma we have endured under capitalism. The first step on that healing journey is to educate ourselves so we can name the problem as capitalism. Naming the source of the trauma opens up our imagination to the immense possibilities that lie beyond it. Our imagination is the source of all real hope for the future. Only we can unleash it.
Fucking dentists! They don't work a full day, they take Fridays off and they go on 2 week vacations to some faraway place several times a year and they STILL have money coming out their ears.
What you're arguing would also affect the .01% - that is why it's a non sequitur. If there is nobody left to buy the cars that Ford produce, Ford won't make any money. And if Ford or Microsoft or whatever don't make any money, they can't pay Mr. CEO his huge salary and they go out of business.
But the amount of wealth in the world isn't finite. New wealth is created all the time. If you listen to the argument Thatcher was making in the video, when wealth is created the rich get richer, true, but so do the poor. The socialists like to dwell on the discrepancy in wealth accumulation that exists between the top 1% and the bottom 99%, while ignoring the fact that the poor in 2013 are still wealthier than the poor in 1963 (they're much wealthier than the poor of 1923, and infinitely wealthier than those of 1883). They're more focused on taking the existing wealth from the top and redistributing it to the bottom than on the creation of new wealth where everybody benefits.
If you're still unconvinced that everybody benefits from the creation of wealth, ask yourself these questions: How many poor lack television today? Cable? Or cell phones, microwave ovens, cars, x-box's, computers, etc.? How many could afford telephones or radios in 1923? How many actually strave to death today compared to those 100 years ago?
Yeah I only work 4 days per week....it's sweet!
Any wealth creation that occurs is still FAR outstripped by wealth accumulation at the top with a net of MORE people moving out of the middle class into poverty.
Look around...that IS what is happening!
Also, don't confuse $ amounts with value. Our currency is being devalued so fast as are things like TVs and xBox which were once luxury items and are now commodity items. $0.25 bought a hell of a lot more in 1920 then it does now.
Any wealth creation that occurs is still FAR outstripped by wealth accumulation at the top with a net of MORE people moving out of the middle class into poverty.
Look around...that IS what is happening!
Also, don't confuse $ amounts with value. Our currency is being devalued so fast as are things like TVs and xBox which were once luxury items and are now commodity items. $0.25 bought a hell of a lot more in 1920 then it does now.
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