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The Critical Condition of Capitalism

CapitalismThroughout the Western world increasing misery has become an expectation. A generation ago and for generations before that, the apparent financial and social trajectory was upward. With that expectation firm, we had forgiven astounding inequality, pockets of deprivation, and public generosity to those that least need it. That was then. At this point no serious economist will suggest things will be getting better in the future. The question now: How bad will it get?

Economists and the Labour Theory of Value

Who knows how bad it will get? We have been listening to economists provide us with information and analysis that is so misguided and wrong that their credibility is little more than an illusion based on wishful thinking. They, their colleagues in the press and in government continue to bury their heads in the muck hoping that if they kick the can down the road, if they tell us all that everything is going to be okay, they will be. The problem with this is that the very serious and fundamental issues that have the Western world sinking are not being addressed or even considered. Part of the reason for that is that there are may be no way of fixing these problems short of revolution. We can lipstick a pig as much as we want but at the end of the day, it’s still a pig.

Over the past three or maybe four decades, economics departments at universities have been marching lock step to the command of Milton Freidman and the Chicago School (and the Austrian School) of economics. And today, if you consult one of these trained oracles they will continue to repeat the same voo-doo they digested at school. They will tell you that wealth flows from the top down; that it emanates from investors and the wealthy. It is (was) logical then to believe that if we manage to seduce these investors to our own location they will create jobs.

At this point in time, we really need to analyze the credibility of these economists. Maybe they understand the situation, maybe not. The latter appears to be the case if we read their opinions and analysis. To the extent they blindly follow those that pay them, they are accomplices. They manage to stave off their natural loss of credibility because they will say whatever the IMF, the World Bank, investors or right wing think tanks tell them to say. As long as they all delude themselves in unison, they can hide in plain sight. To make matters worse, they listen to and applaud each other.  We really shouldn’t assume they don’t actually believe what they say. They have been thoroughly indoctrinated. 

As a result, we see governments throughout the Western world continue to apply the same measures to deal with the crisis that have been key factors in causing it. The unrelenting drive to austerity is but one example of this. 

The most crucial reality that they and we need to understand is the labour theory of value as formulated by Adam Smith, elaborated on by Ricardo, and fine-tuned by Karl Marx.  To understand this economic point of view is to at least consider the possibility that wealth starts with labour (or nature). 

Understanding the labour theory of value requires turning the economic order, as it is, 180 degrees. This view makes clear that the wealth we see around us, the computer, the desk, the chair you sit on and everything else that we use to survive and make life easier is a result of work. And without the input of work and without control (ownership) of resources, commodities have little to no market value (as opposed to use value).   

This perspective sees wealth begin with the ore in the ground and the raw materials that we process for use.  The air we breathe does not need to be processed and it cannot be controlled (owned) by private investors. If those conditions were in place, we would pay for the air we breathe. Medical care, food, and shelter require processing and these items can be controlled (owned).  As a result of this control, we are *not* free in a most profound way; that is, we must sell ourselves, our time, for a wage in order to survive. 

The wizards of the Chicago School (as well as the IMF, the Federal Reserve, the World Bank etc.) and governments throughout Europe and the Western World assume that it is the 1 % that provide the rest of us with what we need to survive (jobs and money). With that assumption in hand, they naturally assume that if their wealth is protected that will ensure prosperity ahead. This assumption has led to bailouts, quantitative easing, and scores of measures to secure a protective dome around the very constituency that has brought us all to the brink. That has made a bad situation critical.

What is really crucial for us to understand is that the common notion of what wealth is is wrong. Money is representative of wealth as a medium of exchange. It would be difficult to bring several pigs to a store to obtain a lawnmower. Money has little or no inherent value. And it is money (in various forms) that has become ‘the’ key commodity as capitalism has matured from capitalism proper to monopolism. Finance capitalists and money traders make a fortune dealing with money (as opposed to tangible commodities). They are dealing with spooks, the world of ether. 

Understanding the labour theory of value not only allows us to see through the absurdity where millions are homeless when homes not only sit empty, but are demolished by the banks; where millions are unemployed while factories rust away.  It shows us that it is the efforts of countless workers that have built the standard of living that we have become used to. It informs us that we can not only do it again, we can do much better. It is our labour power that is the potent powerhouse of latent wealth that we may all benefit from. 

Once we realize that every dime owes its existence to labour we will understand that it is the people that hold all the power. That very realization, once it is understood by a critical mass, will transform our human world. The upshot is we can make this human world as we wish.             

Our Collective Addiction

We have become accustomed to coping with the instability that is characteristic of dependence on the capitalist system as a way of collective survival and well-being. We have faith that things will turn around. It has always worked this way in the Keynesian past. Things will eventually pick up, hiring will come back and the tax base for a healthy public infrastructure will return. Manufacturers will hire and that tax base will employ teachers, medical professionals, and it will re build roads and bridges.  We have learned to expect business cycles and to expect hard times to not be excessively hard and to be followed by a period of energetic manufacturing and spending.    

We have become dependent on the initiative of greed and we continue to hope for the best. The wizards of high finance and economics will tell us that the only hope for us is that we make conditions good enough for investors. Locally, we can get rid of standards, regulations, and minimum wages to make investing attractive. They will ask why they should invest in your location when they the same work can be done in China or India for much less money. The globalization seeds that were planted in the 80s and 90s have flourished and those that own, own more than ever.   

We have come to believe we are dependent, absolutely, on investors. There is a problem with that.

There are no economists on the right and there are no economists on the left that will argue that capitalists or capitalism has a responsibility to provide for the people that are sick, elderly, for children or the unemployed. With that premise in hand, it naturally follows that an alternate means of production and distribution is required. The other alternative is to let them suffer and die.   

(An interesting side-note on this is that all GOP candidates for the 2012 Presidential election were asked by moderator, Wolf Blitzer, about a hypothetical 30 something year old male that did not buy insurance who goes into a coma and needs intensive care. While the candidates struggled to euphemize their answers saying he should have bought insurance, the crowd cheered wildly voicing their enthusiastic agreement that the man should die.)

While this looks unbelievably barbaric, in fact 3,000 Americans die each month because they are not insured. Obama’s plan is to fix it by forcing Americans, by law, to pay protection money to health insurance racket.       

So then, if we depend on private investors and they can’t and won’t provide for those in need, we have a choice to make. We either see people that cannot earn a wage or find any other means of feeding themselves as doomed or, we can make the progressive assertion that we do have a responsibility to take care of human beings that cannot survive or live comfortably without help.        

Critical Condition

The situation may be that we are trying to maintain and preserve a stage of economic and social development that is just that; a stage. It appears to be obsolete. We may try to hang onto a system of production and distribution that is critically ill. We may do so out of cowardice, apathy, or morbidity but for sure, we cannot do so rationally. At this point, it does not look as if we want to come to life. History may be screaming for us to wake up but we may be too sleepy to pay attention.      

If we do listen to the voice of history, we will see with no doubt that we are in serious trouble. There are factors at play that are fatal to our traditional reliance on capitalism. For instance, technology has made it possible to produce goods with little labour input. As a result, demand for goods and services cannot depend on wages. This will get worse as technology allows firms to produce goods with less and less wage costs. The more efficient the whole system gets, the less we can depend on wages for an honest day’s work. And as the rate of profit is reduced per unit of labour, the capacity to squeeze profit from a unit of labour diminishes.    

To re-state the glaringly obvious: We cannot depend on selfish impulses in a small portion of society to care for the sick, the elderly, and families.  We are depending on the most manipulative and selfish members of society to care for those most in need. The time is coming when we need to act. At some point the situation will become too critical to salvage the most basic material and structural development we have accomplished. 

The argument can be made that we, the people, can get people elected to focus on people’s priorities such as a healthy public infrastructure and job creation. While this is technically true, it is not plausible. We are getting to a state of desperation where traditional vote buying and financial bullying can no longer be tolerated. Meaningful change will require a new system of democracy and a new system of production and distribution. The elites and their political whores have not only perverted systems of production and distribution, they have corrupted democracy to the point that elections are meaningless.

The time to start organizing to provide the essential and vital needs for the weakest members of societies is well behind us and we have not even started. This is a pressure cooker, a recipe for violent and bloody revolution. Like the sudden onset of the counter culture movements of the 60s, revolution can come with a sudden and unexpected public expression of rage. It is a matter of time.

On the other hand we can start planning for our collective response to the increasing and unacceptable deaths of citizens due to material deprivation. It is worth starting this discussion. Withstanding the appearance of far-fetched hypotheticals, we need to discuss very different approaches to the production problem and the distribution problem.

We can and should use parliamentary processes to affect revolutionary changes. Bills can be passed that do not take effect until certain minimal criteria are met. This suggestion is quite reasonable. Once the misery index is satisfied, whole new constitutions underlie the legal governance of the nations and the natural resources and labour power of the nation aims to meet human needs that are not satisfied through the residual droppings of the profit system. One way or another, we must take matters into our own hands.   

In the meantime, we will need to build an alternative that empowers all citizens.


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