How Secure is Global Capitalism's Future?

Timothy Garton Ash of Oxford University and a senior fellow at the Hoover Institution at Stanford University says that Karl Marx "was prescient" in his description of global capitalism:

Will capitalism fall victim to its own success?, by Timothy Garton Ash, Commentary, LA Times: What is the elephant in all our rooms? The global triumph of capitalism. Democracy is fiercely disputed. Freedom is under threat, even in old democracies like Britain. Western supremacy is on the skids. But everyone does capitalism.

Americans and Europeans do it. Indians do it. Russian oligarchs and Saudi princes do it. Even Chinese communists do it. And now the members of Israel's oldest kibbutz, that last best hope of egalitarian socialism, have voted for salaries based on individual performance. Karl Marx is turning in his grave. Or perhaps not, because some of his writings eerily foreshadowed our era of globalized capitalism. His prescription failed, but his description was prescient.

What, after all, are the big ideological alternatives? Hugo Chavez's "21st century socialism" still looks like, at most, a regional phenomenon best practiced in oil-rich states. Islamism — billed as democratic capitalism's great competitor in a new ideological struggle — offers no alternative economic system (aside from the peculiarities of Islamic finance) and does not appeal beyond the Muslim umma. Most anti-globalists are better at pointing out the failings of global capitalism than they are at suggesting systemic alternatives. "Capitalism should be replaced by something nicer," read a placard at a May Day demonstration...

Does the lack of any clear ideological alternative mean that capitalism's triumph is secure? Far from it. For a start, the history of capitalism hardly supports the view that it is an automatically self-correcting system. ...[G]lobal markets are now more than ever constantly out of equilibrium — and teetering on the edge of a larger disequilibrium. Again and again, capitalism has needed the visible hands of political, fiscal and legal correction to complement the invisible hand of the market.

And the bigger it gets, the harder it can fall. An oil tanker is more stable than a dinghy, but if the tanker's internal bulkheads are breached and the oil starts swilling from side to side in a storm, you have the makings of a major disaster. Increasingly, the world's capital is like oil in the holds of one giant tanker, with ever fewer internal bulkheads to stop it from swilling around.

Then there is inequality. One feature of globalized capitalism seems to be that it rewards its high performers disproportionately. What will be the political effects of having a small group of super-rich people in China, Russia and India or other countries where the majority are super-poor? In more developed economies, such as Britain and the U.S., ... if a lot of middle-class people begin to feel that they are personally losing out as a few fund managers get stinking rich and jobs are outsourced to India, you may have a backlash. Watch Lou Dobbs on CNN for a taste of the rhetoric to come.

Above all, though, there is the inescapable dilemma that this planet cannot sustain 6.5 billion people living like today's middle-class in its rich north. In just a few decades, we would use up fossil fuels that took about 400 million years to accrete — and change Earth's climate as a result. Sustainability may be a gray and boring word, but achieving it is the biggest single challenge to global capitalism today. However ingenious modern capitalists are in finding alternative technologies ... somewhere down the line richer consumers will have to settle for less rather than ever more.

Marx thought capitalism would have a problem finding consumers for the goods that improving techniques of production enabled it to churn out. Instead, it has become expert in a new branch of manufacturing: the manufacture of desires. It's that core logic of ever-expanding desires that is unsustainable on a global scale. But are we prepared to abandon it?

We may be happy to insulate our lofts, recycle our newspapers and bicycle to work, but are we ready to settle for less so others can have more? Am I? Are you?

Comments

[ilsm]

Equilibrium: Is the economy designed or evolved so that like a super agile fighter aircraft it is on the edge of instability and control maintained by numerous small corrects the effects of which in the longer term are not apparent.

A fighter aircraft eventually slows down and lands. The control sets are not carried to the next flight.

But economies have memories and the tweeaks may lay externalities.

So say nothing of unanticipated or poorly responded to externalities.

I wish Dr Bernanski well.

[Real Person from the Real World]

HHhhmmmm, looks like our fate rests on "oil"
(....there is the inescapable dilemma that this planet cannot sustain 6.5 billion people living like today's middle-class in its rich north. In just a few decades, we would use up fossil fuels that took about 400 million years to accrete — and change Earth's climate as a result. Sustainability may be a gray and boring word, but achieving it is the biggest single challenge to global capitalism today.)
If that's all we have to fear, let's bring on the era of the electric car and more public transportation!
I think the real destabilizing factor is the...
(One feature of globalized capitalism seems to be that it rewards its high performers disproportionately.)
I would quibble with the term, "high performers," however. Take a look at the poor record of some of the CEO's who get the golden parachute while the company goes down the toilet.... power does not necessarily equate to "high performance." We have inequity of power, and power gets the money.

[Tim Worstall]

Apologies for this but the piece is too long to use as a comment. Garton Ash really doesn't know what he's talking about:
http://timworstall.typepad.com/timworstall/2007/02/tim_garton_ash_.html

[evagrius]

Well, global warming will soon put capitalism to the test.

[ken melvin]

Capitalism never extended.

[reason]

Tim Worstall...
I read your piece (in spite of your link not being correct), and my response is simply aggregates can hide a lot.

I happen to not believe in exponential growth (it never happens over the VERY LONG term). I believe there are a lot of seperate systems and each goes through periods of growth, stagnation and decline. When added together at certain periods it can look exponential. But it doesn't take much to show that all exponential systems eventually run out of resources.

Yes we will become resource efficient, and economic growth is not all resource intensive. But the current wasteful way we live in the West cannot be extended to everybody. 3 percent growth in world GDP does not mean 3 per cent proportional increase in everything.

And you are assuming that the results of the growth are well destributed. That is not exactly what experience is teaching us at present.

[reason]

Even ignoring the cornicopian response however, there is a mistake in referring to "capitalism" as though that represents a clearly defined single system. I think some work is needed to define what a less resource hungry and egalitarian system, that was still dynamic, adaptive and inventive might look like. There is still plenty of scope for micro-economic (institutional) innovation.

[Cyrille]

I read the piece too.
Well... even putting aside the fact that high emissions scenarios would probably wipe mankind from the face of the earth by 2100 (which would be a problem for sustainability), the very fact that it would be a high emissions scenario proves that it would mean a high consumption of resources that are, er, finite.
So even if you can write a scenario that could go on until 2100 (and that means ignoring BIG reservations), 2100 is not forever. Whether the resources that took hundreds of millions of years to build last 200 or 250 years is irrelevant to the fact that the model is far from sustainable.

[realpc]

"are we ready to settle for less so others can have more? Am I? Are you?"

I don't understand how cutting back capitalism would decrease poverty. I thought global capitalism was helping people get out of poverty. Even Krugman said that. So isn't this guy making the usual Marxist error, thinking that when some people get richer others must get poorer?

I agree that our current form of capitalism has its problems. But freedom depends on some kind of capitialism. It doesn't have to be petroleum-based.

The idea that middle-class Americans, for example, can decrease poverty in Africa, for example, by giving money or cutting back in some way has been disproven, I thought.

[Dan]

I think that Tim and some of the readers, based on the comments above, are failing to grasp what capitalism truly is. For capitalism is the economic freedom to determine individually, the flow of goods and services between the purchaser and producer for mutual benefit. It is not dependent on cheap energy, free water, the level of poverty in the third world or the price of oranges in Denver. Capitalism is ultimately successful because of it’s flexibility to adjust to new information and price accordingly.

There will be crisis after crisis in global trading and global demand will ebb for some products and peak for others. Capital will shift to follow the demand and profits will be made. Governments will chase the political flavor of the week and tweak the rules of the game by taxing this and subsidizing that but the game will remain the same.

But this is from a banker wearing a shirt that reads ‘Happy Capitalist’ so judge accordingly!

Dan

[ken melvin]

Is there a trinity; free markets, capitalism, and free enterprise?

[donna]

"are we ready to settle for less so others can have more? Am I? Are you?"

I am. Hell yes.

[piglet]

That's the best and most thoughtful piece I have read bu TGA. Well, it's not original, we have read that before, but you can't reasonably disagree. Well, Worstall disagrees, but that is quite consistent with my statement ;-)

says...

Ok, I read it too. This is what Worst-of-all says:
"Now we have in fact had a look at what the future might be like. It's called the Special Report on Emissions Scenarios and it's what forms the basis of the IPCC's report on climate change...
"The A1 storyline is a case of rapid and successful economic development, in which regional average income per capita converge - current distinctions between "poor" and "rich" countries eventually dissolve."

Worstall says that since these scenarios have been thought of, they must be realistic.
Reject this and you need to reject the scientific consensus on climate change itself: for it's the very basis upon which it is built.

Bullshit. It's a storyline. The authors of the report don't say this is what could realistically happen. They just say, let's assume this happens, what are the consequences on climate? The scenario is based on assumptions that are not themselves tested, like this one: "Energy and mineral resources are abundant in this scenario family because of rapid technical progress, which both reduces the resources needed to produce a given level of output and increases the economically recoverable reserves."

Let me repeat that: the authors, just for the sake of argument, assumed energy and resources to be abundant. Worstall says this is proof that energy and resources aactually *will be abundant*.

How embarassing.

[Peter Schaeffer]

Ken Melvin,
"Is there a trinity; free markets, capitalism, and free enterprise?"
That was certainly the neocon/neolib fantasy that got the U.S. involved in "Democracy Building" in Iraq. Didn't quite work out as planned.
Of course, from a global perspective the rise of China as a (quasi) free market/ (quasi) free enterprise illiberal superpower is probably far more important than our woes in Iraq.
Certainly the trinity is part of the globalist worldview. A key rationale (OK, excuse) for globalization is that it will bring democracy and freedom to the benighted regions of the globe. Reducing it to elite self-interest would be to crass.
Doesn’t make it true though. See The Rise of Illiberal Democracy by Fareed Zakaria for one critique. Of course, as China shows, any semblance of Democracy is optional as well.

[wjd123]

"Marx thought capitalism would have a problem finding consumers for the goods that improving techniques of production enabled it to churn out. Instead, it has become expert in a new branch of manufacturing: the manufacture of desires."

It seems to me that the state in order to protect society can un-manufacture desires. Smoking, an addictive desire, is an example. The state limits advertising. Hangs the albatross of personal and social irresponsibility around the neck of smokers and gradually smoking is no longer socially acceptable.

What is the ultimate purpose of business? To make a profit, yes, but its ultimate purpose is to serve the needs of society. Society can insist that it does. Social interests trump individual interests and corporate interests. Both are subject to regulation for the good of society. Marx certainly has more than his nose under the capitalist's tent.

Once second hand smoke was shown to be harmful to the health of others, NYC was able to ban smoking in restaurants and get away with it. Even be praised for its intervention into this aspect of public life. I've yet to hear anyone say that the law should be abolished because it's hurting the interests of the tobacco industry. I've heard very few people ever say that smokers should be allowed to smoke where and when they want to, and if non-smokers don't like it, they should cook their meals at home.

Society is the superego that keeps the individual ego in check

[Movie Guy]

Is Donald Trump being kept in check by the superego of society?

[wjd123]

Does society disapprove of Trump's actions or admire them. Conan O'Brian makes fun of him. People find it funny. Why?

[reason]

Dan,
I'm not sure who you addressing your comment to. Most people here I'm sure realise that.

But when your life has a lower value than the food it takes to keep you alive, come back and tell me what rules you want tweaked.

I also though are a bit puzzled by exactly what capitalism exactly TGA is talking about that may not survive. I think he means modern global capitalism in its current form.

[reason]

realpc...
just to clear up your confusion, what he means that a shortage of resources implies that any move to globalising the western middle class lifestyle will inevitably undercut itself via resource price increases. These will both make it harder for third world countries to attain that lifestyle and for the western world to retain that lifestyle. There will be fights about who ends up getting what.

[Real Person from the Real World]

Just read a story about coats from China having DOG fur. Several years back I saw a video by some group smuggled out of China, showing people skinning LIVE dogs for fur.... pitiful, the animals were scared and pleading.

Uncontroled Captialism condones winner take all, as well as ANY means, fair or foul, to win. These 3rd World countries (lets not target lone China, here) will never flintch at doing whatever they have to, to come out winners. When will people wake up and realize that there needs to be SOME control of capitalism, for the sake of our humanity, if nothing else.

This blog has documented people who want to justify things such as limiting healthcare on the basis that some people "over consume" it, or that they should be penalized for "unhealthy" lifestyles.... Anything to justify their keeping their own nice lifestyle, and high paying jobs, regardless of what is happening to anyone else.

[callahan]

Real Person, what you said was Real Well said.

[Carolyn Kay]

WHAT??!! Fewer Nintendos? Less lip gloss? Fewer Barbies? We will NOT stand for it.

Carolyn Kay
MakeThemAccountable.com

[Real Person from the Real World]

Hey Carolyn, What exactly are you trying to say? Spit it out sweetie. How old are you anyway?

[Real Person from the Real World]

OK, Carolyn, looked at MakeThemAccountable.com - OK website. Hope it does help make our elected people more accountable. Unfortunately, it takes LOTS of money to run, that is why we're govern by a bunch of multibillionaires. There may be a few self made ones in there, but not many. Not sure how exactly this ties into the topic for this particular set of threads, but a good place to look for those motivated to make change happen. (I still think your comments were stupid but thanks for pointing out the link.)

[Carolyn Kay]

Real Person,

You think it's stupid to mock the people who don't want to live more simply? We don't have to be slaves to Madison Avenue, you know.

Carolyn Kay
MakeThemAccountable.com

[Real Person from the Real World]

I believe in simple, Lady. I live it because I cannot afford otherwise. However, my philosophy is 'to each his own.' I do not buy a nintendo, nor do I condemn people for having nintentos. I applaud those buying the few US products that remain. Since the topic is global captialism, my point remains that most of these developing countries are so anxious to knock the US off its perch, merely to become the top dog themselves, while screwing their own people and us at the same time, and they use unfettered capitalism to do it. Do you think some of these countires care about workers in industries using hazardous toxins and fumes in places without adequate ventilation, in order to save on cost? A few peasants die, and you just go out and hire a few more. Bodies is what they are selling, and what is undermining jobs in the US.

[Carolyn Kay]

I guess I'm not that combative.

Carolyn Kay
MakeThemAccountable.com

[Real Person from the Real World]

I think you are talking about one thing (MNC), and I am talking about something else ("live simple"). either that or just trying to promore your blog.

[Carolyn Kay]

I don't know what MNC means. And what's wrong with promoting my website? Isn't that the American Way?

Carolyn Kay
MakeThemAccountable.com

says...

Looks like all you want is the last word. Not combative?

[Carolyn Kay]

Looks like all you want is the last word. I don't notice any refutation of what I said.

Carolyn Kay
MakeThemAccountable.com

[gordon]

"..are we ready to settle for less so others can have more? Am I? Are you?"

Well, increasing inequality in all the Anglophone countries and increasing between-country inequality globally probably mean that lots of people are ready to settle for having more regardless of who has to have less.

[Real Person from the Real World]

Carolyn, you don't say anything to refute.

says...

Going back to the original article, if capitalism works, it should improve life for more people, and an improved life in one country should ecourage the spread of capitalism. Isn't that always been the conventional line? The big problem is that many countries do not have true capitalistic markets, and indeed, manipulate trade and other factors to their own benefit (China, for one example). Also, totally unrestrained capitalism encourages abuses and greed (13 insider traders were recently caught in our own country, CEOs making billions while the company goes down the toilet and employees lose their pensions - an old story). Basically, any economy should recognize that inequity is destabilizing and a successful economy should promote the 'greatest good, for the most people.' Unfortuantely, we only seem to recognize this when things get so bad, something has to be done (great depression > FDR & new deal)