The end of capitalism
November 14, 2008 4:14am CST
When I left school nearly 50 years ago, my first two jobs were in the accounts departments of a couple of small, family-owned and run engineering companies. In both of them, there were three generations of several families on the factory floor, and wives and daughters from the same families in the office and canteen. The owners set a profit target for the year that would allow them to live in the manner to which they had become accustomed, and if the company managed to beat that target, as they did every year I was there, they paid bonuses to the staff. One year that was two weeks extra wages. The family attended staff funerals, weddings, and christenings: the workers were paid well, the partners made their profits, the government got its taxes, and everyone was happy. That's what I understand as free market capitalism. By the 70s, theoretical economists, may they rot in hell, began pushing the barrow of constant growth, in turnover and profit, as the only relevant indicator of business success. Small and medium size businesses began to amalgamate into medium and large businesses in the name of economy of scale. Someone realised, as the domestic markets of these companies began to shrink, that it was unwise to make good quality products that would last for years, and that abomination called 'planned obsolescence' came into being, the manufacturing of shoddy, short shelf-life products to encourage the customer base to return for new products. But soon even this began to fail, so they set their eyes on new markets, and so began what is now called globalisation. But to create new markets in Third World countries meant dragging them, kicking and screaming, into the 20th century, and in the process of modernising them, dozens of eminently viable and successful subsistence economies were destroyed, creating the roots of what we now call 'global poverty'. The Green Revolution is one of the biggest snow jobs in modern history. But since the West controls 90% of the wealth, even these mew markets quickly became saturated, leaving the now large and superlarge international companies seeking new ways of increasing profits. If markets cannot be increased, all that is left is cost-cutting, which almost invariably means cutting wages and employment. Automation, where possible, was introduced, putting many people out of work. Then the unskilled and semi-skilled jobs were relocated off-shore, in Third World countries where the companies could get away with substandard wages, substandard safety practices, and no job security. The third process was to prune down the skilled staff by making fewer people do more work. The results of this last effort are becoming clear: Australia's largest airline, for instance, has one of the best air safety records in aviation history, yet three times in the past year alone there have been close misses that could have turned into major disasters. Once the self-serving, a$$-covering BS is pushed aside, we find the major problem is poor maintenance, because the reduced maintenance staff is simply not able to do its job properly. It is only a matter of time before it will be as risky flying with Qantas as it is with some shoe-string operation in SE Asia. In the meantime, all those staff put off in the name of cutting costs are having trouble finding new jobs. Most who do are forced to accept substandard wages, substandard safety practices, and no job security, just like their colleagues in the long-suffering Third World. The rest can't find jobs at all, and so we are now developing in the world's richest countries a poverty-stricken sub-class identical, in relative terms, to the sub-class in the Third World. And what is worse, this sub-class were once not only workers, but consumers. Big business is destroying its own customer base in the search for greater profit, a contradiction which even Marx saw 150 years ago. Communism collapsed 20 years ago: it seems likely that Capitalism won't survive it by much more than 25 years. What prompted this essay length discussion post is the number of hysterical discussions begun by the loony American Right bltching about the government bailouts in the US, and along the way, criticising the Poverty Relief Bill on the grounds that the US has enough poverty of its own - er funny, didn't I just say that? But I have to ask this question: if this poverty-stricken underclass has developed as a direct result of the SUCCESSFUL operation of America's giant corporations, what on earth is it going to be like if they actually collapse? The Great Depression is going to look like the Teddy Bears' Picnic. Lash
• Lancaster, New Hampshire
14 Nov 08
Pretty provocotive writing. Good work, very good. My problem is not so much about bailing out a comapny in itself, though I believe if you wish to succeed in a business, your business model should support those desires. If you become so successful, that the economy of a city, a state, a nation or the world becomes dependant on your sucess, you then have certain responsabilities to succeed that reach far beyond your own profit margine. The "financial rescue" package passed by our government, the one that started at 1,45 trillion dollars, did far more than just "bail out" or "prop up". It did exactly what a good conciencious capitol society should never do and exactly what you decried in your piece. It placed the power of money in the hands of very few. and exponentialy increased the power and effect of that money on the worlds stability. By our laws laid down a long time ago, only the congress had the power over money, because the congress was a representaion of each state and by proxy, the people of those states and of the nation. Money was, like it still is today in most countries, backed by something solid. The system we adopted, about the time your piece demonstrates things started to go ary, give or take a decade, altered that and set a course,a dangerous course in which our monetary system has played a game of chicken ever since. There are some who believe that big corperations run the world and governments, with power and authority supassing any government. While I am not a conspiricy theorist, I don't doubt to some degrea they have a point. And now, with these corperations digging in to the public treasury by the hundreds of billions of dollars, one can't help but wonder if "conspiricy theorists" have latched on to a grain or 2 of thuth. One has to at least wonder, if this may not have been in the backs of the minds of powerfull people.
14 Nov 08
Nice thoughtful post, though I don't think we will see the end of capitalism, but hopefully what we will see is the end of the unbridled free-market devil take the hindmost variety that we have seen over the last few decades. But don't get too excited as we should never underestimate the ability of the rich and powerful to skew the agenda in their favour (govt for the rich, on behalf of the rich, etc comes to mind - govt for the people, what a laugh!). I have grown very cynical of national politicians and their governments who seem to constantly curry favour with the rich and big business. Sorry, but I don't see this changing that much: yes in view of the current public outrage at their excess, I suspect there will be some more regulation of the banking sector and some reining in of the worst excesses, but be assured that once things have quietened down a bit, the rich and big business will be at it again (with their free lunches for corrupt politicians on their expensive yaughts) doing everything to ensure that these new regulations are not too onerous, as otherwise this would hurt their dear profits. Still, we can always live in hope I suppose...
15 Nov 08
I too am cynical about the rich and their power, but I beieve there is a new wind blowing. Inglehart, a German sociologist, came up with a thesis called Postmaterialism, which suggests, with strong objctive evidence, that we are coming into a time of generational change in which the new leaders will tend to be far more socially than economically motivated. Obama, and our own Kevin Rudd seem to fit the mould, although just how far they will be forced to compromise is another question. Nevertheless, I have some hope that things will improve if only in the setting of much firmer regulations of big business by governments. Lash
14 Nov 08
I hope we will see the end of this greedy capitalism and maybe a return to a more sane and less selfish way of life. I get so angry when I see companies sacking staff to try and increase their profits. It is bizarre when someone say why did you lose your job is the company in trouble and the person says no they posted record profits this year because they sacked some more staff to achieve it. This is a stupid economic model that is doomed to failure. Unfortunately an awful lot of people are going to suffer in the process.
• Sheboygan, Wisconsin
14 Nov 08
Capitalism is alive and well but not living in the world of the globalist corperations. Where it is living and thriving is in the small and medium businesses. Proprietorships and corperations run by people who work 70-100 hours a week, often working entire days for no pay at all, but spending hours of their day making payroll for their employees. Not one of the people running these companies ever expected a bailout or government handout... but the government has no problem increasing their tax burdons and fees. Most of these business leaders don't bother figuring out how much they make an hour because it would only depress them, but they do have to sit and listen to their employees whine on about how much more THEY deserve an hour. Still, you are right about a lot of things here. Mostly that there is only so far expansionism can go. I remember working for Wal~Mart, learning about merchandising and retail. So many things that were accepted as fact were blatantly arbitrary. For example, the whole idiocy of comparing the reciepts of a given day to the same date the year before. Managers were so pressured to have an increase from the same day the previous year, but the specifics of the days were never taken into consideration. Another example was tying bonuses to shrinkage and on the job accidents. By policy, Wal~Mart associates couldn't do anything at all about shoplifting. Even with my experience and training in stop loss security, if I saw someone shoplifting all I could really do was report it to an asst manager... if I could find one. Tying the bonuses to on the job accidents only caused animosity between the associates and the one injured. Capitalism works every time its tried. The problem is, government and power hungry oafs (often the very ones who defend capitalism the loudest) just can't let capitalism work for fear of losing their own power.
15 Nov 08
We don't often agree on things, you and I, but I too believe that there is a world of difference between small "c", entrepreneurial capitalism of the type I described in my first paragraph, and you in yours. The corporate Capitalism of economic globalisation is another thing altogether, and I would applaud its collapse, except for the problem that millions of "innocent" bystanders will go down with it. So I do in fact support bail-outs, when they are sensible. It remains to be seen if what Bush has done will work, but here, because the ruling Labour party has a background of democratic socialism, the methods are somewhat different, and I can see a partial return to government involvement in utilities, at least, if not business. I imagine you would find that unpalatable. Lash
• Sheboygan, Wisconsin
17 Nov 08
I agree that bailouts aren't always bad things. The problem with them though is they breed more bailouts. Why? Because they create bubbles in segments of the economy. When those bubbles burst then more bailouts are required.. which lead to more bubbles and... viscious cycle. But as much as I dislike socialism, I'm not so naive that I think capitalism in its pure form can work. Capitalism is the best economic system, but it has to be tempered by small and controlled amounts of socialism.