Are we seeing the final crisis (pdf) of capitalism? What I mean is that Marx envisaged that the end of capitalism would see four features, all of which are in place now.
1. The rate of profit would fall, reducing the motive to invest and producing slower growth and bigger recessions.
Although observed, past profit rates are high, companies’ reluctance to invest and the low valuations on shares suggest that bosses and shareholders anticipate very low future profit rates.
2. Low returns on real assets would lead to speculative bubbles and swindles and hence financial crises.
To some extent, the banking and euro area debt crises are the results of the dearth of real investment opportunities arising from the fall in (expected) profits. This lack of investment, combined with high Asian savings drove bond yields down. That led to the growth of mortgage securities, as banks tried to synthesize securities to meet demand for them, and encouraged governments to borrow. In this way, the seeds of the financial crises were sown by the fundamental crisis of real profitability.
3. Increased inequality would exacerbate economies’ propensity for crises, by creating a mass of people too poor to buy the goods which capitalism produced.
This has not quite happened. But, as IMF research has argued, inequality has had a very similar destabilizing effect. It led to the build-up of debt which contributed to the banking crisis.
4. By its end, capitalism would cease to be a means for developing the economy’s productive forces and become instead a barrier to their development. As Marx put it:
At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production…From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution.
This too fits capitalism today. Capitalists invest only if it is profitable to do so. When returns to investment were monetizable, this meant that capitalism was indeed a form for developing the productive forces. But returns have become less monetizable, and so capitalists are now less willing to invest. I mean this in several ways:
- Investment is no longer about building big factories and using capital-intensivity as a barrier to entry and hence form of monetizability; this is done in Asia rather than the west. Instead, investment here is more closely tied to innovation. But capitalists have always had trouble appropriating the returns to innovation, and so are - now they have wised up to this - are reluctant to undertake it.
- Some/many investments (such as in green technologies?) have higher social returns than private returns. But capitalists don’t invest merely because social returns are high.
- Technology and changing social norms mean that many capitalist investments in the media are no longer monetizable.
Insofar as there are potentially useful investments which are capitalists are not undertaking because they are not profitable, then capitalism is indeed a fetter on the development of productive forces.
Now, of course, the death of capitalism has been hailed many times before. But I suspect that this crisis differs from that of the 30s and 70s.
In the 30s, profits were depressed by weak aggregate demand, something which could be cured. In the 70s, they were depressed by labour militancy, and when this was killed, capitalists’ desire to invest was rekindled.
But the problem now is deeper than then. Capitalism has lost its underlying oomph; investment was low, remember, even before the recession. And this suggests that its vitality cannot be restored by policy measures, be they Keynesian (“boost demand”) or Thatcherite (“attack workers“).
Herein, though, lies the problem. Even if capitalism is dying - and I say if - there is no-one to kill it off; Marx’s prediction that the working class would become a powerful agent of change was wrong. And there is no well worked-out vision of an alternative. Gramsci’s words fit the bill:
The old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear.