Capitalism Today: Atlas Shrugging or Atlas on Life Support? (Part 2 of 2)
Whereas Ayn Rand viewed capitalism as an historical plateau for human civilization, Karl Marx viewed capitalism as inherently flawed and merely a temporary period in history. Unfortunately, owing to the fates of the USSR, Cuba, and China, much of Marx's original ideas have been skewed in light of history. It would appear that from my experience growing up and going to school in the US, the two most prominent works regarding Marx's theories seem to be none other than George Orwell's "Animal Farm" and "1984". Even so, in due justice to the thinker, I think framing the current global financial crisis in light of Marx's philosophical ideas (while unhinging the ideas from their respective historical and ideological undertones) can be beneficial.
For Marx, the crux of capitalism's doom is a concept known as the tendency for the rate of profit to fall (TRPF). This concept may be foreign to some, but the TRPF finds a fitting sibling in the law of diminishing returns discussed in mainstream economics. For Marx, the TRPF is the key for why capitalism is an unsustainable system. In order to deal with the TRPF, capitalists would use countervailing influences such as bailouts, credit expansion, foreign trade, and reducing wages in order to postpone the inevitable collapse of capitalism -- in other words, capitalists would use counteracting tactics to effectively kick the can down the road. Does this sound vaguely familiar?
We cannot overemphasize enough the formidability of these countervailing influences. At the time Marx was writing, he cited about six countervailing factors to deter the TRPF and its effects on the capitalistic system. Since Marx, various thinkers have added other countervailing factors to the list including warfare, antitrust laws, and monetary inflation. To say the least, one might argue that Marx did not foresee the great lengths that capitalists would go in ingeniously crafting innovative countervailing influences to deter the TRPF. One might also argue that the capitalists found their respective "thermonuclear device" of countervailing influences in the form of Keynesian monetary policy. Keynesianism is pretty much the atomic bomb of counteracting influences to the TRPF. Whereas Marx may have viewed capitalism's collapse as a superstructural phenomenon as being near in the future, arguably Keynesian monetary policy, overpopulation, credit expansion, and foreign trade have extended capitalism's course for decades -- in the words of economist Nouriel Roubini, delaying the "final day of reckoning".
That being the case, various counteracting influences to the TRPF and their strength lessen over time, e.g., people get tired of wars, bailouts, and wage reductions; individuals can only work so many more hours in the day. Marx appears to have believed that at some point, this situation would catch up with itself -- thereby leading to a transition to a new historical superstructure. Just as a human grows from a baby to a child to an adult to old age, capitalism would run its course and age -- eventually finding itself on life support. And with the prospect of Keynesianism as a potent weapon of kicking the TRPF can far down the road, from the perspective of Marx, it is as if we today find ourselves pretty much in the 1930s.
Even then though, for Marx capitalism does not collapse thereby necessarily bringing about socialism; Marx did recognize alternatives to socialism in the historical progression; I've previously mentioned alternatives including barbarism and extinction. In theory, for Marx capitalism could endure to such a point where by virtue of man's desire to survive, the capitalist system becomes impractical. The severity of crises increases over time to a breaking point. At that point, the capitalist superstructure has become so weakened that it is a mere frail shell of what it once was.
One may wonder why we're not hearing more about these ideas from mainstream economists. I believe there is a practical agency-dilemma reason as to why this is the case. To use an analogy, if you were the general manager of a professional football team and you had to hire a new team physician, which sort of physician would you prefer: an optimistic doctor who believes that football can be a rough sport at times but with sports medicine the few injuries that occur in games can be repaired using advanced training and better technology, or a pessimistic doctor who believes that football is an inherently rough sport that is doomed to become unpopular with the growing awareness that football is an inherently unsafe and unhealthy sport? I think the same goes for mainstream economists and Marx's ideas regarding capitalism.
One may contend that the history and collapse of the USSR and free-market reforms in China and Cuba suggest that Marx was wrong. (Again, "Animal Farm" and "1984".) However, in considering the historic superstructural progression from ancient society to feudalism to capitalism going forward to socialism, the spearhead of the developing transition from capitalism to socialism would probably not occur in Russia or China, but rather in the US and Western Europe...the cutting edge of the historical process. If it is true (per Marx's theory) that no superstructure collapses until all the productive forces of the superstructure have been developed, then it makes sense to say that the revolutionary transition from capitalism to socialism would be expected to occur more so in the US and Western Europe, rather than in Russia or China. That being the case, the completion of such a superstructural transition may not occur for hundreds of years into the future. In this sense, the "socialist" state as Marx was writing about would be a fully-developed 27-year-old adult and the historical notion of a "socialist" state would be like a 13-year-old adolescent.
A cynical skeptic may wonder why Karl Marx was so fortunate to come across this theory. An economist may ask, "How come Marx was the first one to see this historical progression in terms of the productive forces? Why didn't any ancient society or feudalistic thinkers come to these conclusions?" The answer to that question goes back to the idea of historical consciousness. Arguably, thinkers through history have espoused ideas that resemble Marx's, e.g., Thomas More's "Utopia", but such ideas were mere historical shadows in comparison to Marx's work. Obviously, whereas there are communist and socialist political parties, there are generally no aptly-labeled capitalist political parties; this could be owing to historical consciousness. It doesn't make any more sense to have a "Capitalist Party" as it would be to have a "Feudalist Party"; the crux is consciousness of this historical progression, the process of growing up. (In comparison, Rand viewed laissez-faire capitalism as the morally proper system of government and economy, arguably for the entire span of human history. Thus, from Rand's perspective it appears that for indigenous peoples, ancient Greeks and Romans, and medieval lords, laissez-faire free-market capitalism would have presumably been the most ethical, most morally proper form of government and economy. This comparison demonstrates how and why theoretical capitalism has to be separated from historical capitalism.)
Furthermore, the study of economics is a relatively recent phenomenon, coming to a sense of full consciousness with Adam Smith's "Wealth of Nations" ironically in 1776, the dawn of the American Revolution...the time when global capitalism would really take off with (as Marx might say) the "dictatorship of the bourgeoisie". As I've explored previously, superstructural transitional time periods are dotted with various events that made up the revolutionary transition. Arguably, we have been seeing and are beginning to see various global events that could portend a new superstructural transition from capitalism to another superstructure. What that new superstructure entails into the future remains yet to be seen.
Taking the abovementioned discussion into account, I think framing problems in contemporary Western capitalism from a historical perspective can help in determining the financial system's sustainability going forward. Crucial flaws in Western capitalism go back to the ideas of (1) ecological sustainability to ensure that the planet will not be destroyed and (2) regulation of the market given that capitalism-in-theory is quite different from capitalism-in-practice. Whereas Atlas may appear to be shrugging, our perception could be owing to the systemic old age of advanced capitalism. It can be easy to say on an ideological level that government intervention is stunting the free market, but I would argue that American society and the establishment do not really want a completely laissez-faire free market. We don't want the tent cities next to high-rising thoroughfares and skyscrapers. We don't want to see families lounging by the road impoverished owing to the concentration of wealth.
That being the case, despite all the ideological debates, I'm not sure that there needs to be much disagreement between Ayn Rand and Karl Marx's perspectives. Both seek to justify economic systems on different terms; for one, the crux is ethics, and for the other, the crux is history. Each respective position is founded on its own terms. The current ideological debate between liberals and conservatives over the role of government is overshadowed by history and reality. Nevertheless, the market and the Weltgeist of history appear to have ideas of their own. Seeing the global financial crisis in this light helps us to figure out where we have been, where we are today, and more importantly, where we are going to go in the future.
When all is said and done, with respect to whether Atlas is shrugging or merely suffering from old age, perhaps some contemporary thinkers will soon discover what ancient peoples discovered long ago: Atlas isn't holding up the world because Atlas doesn't exist.
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