Systems of governance, and both capitalism and democracy are such systems, can run cycles of success, failure and renewal for a long time. Consider Imperial Confucian China, with dynasties failing, sometimes with interregnums, then new dynasties arising. Dynasties would tend to be vigorous to start, corrupt and sclerotic at the end.
Or Dark Ages and Medieval Europe, with forms of feudalism and monarchy surviving crises over many centuries.
Let’s consider the dynamic in a bit of detail.
A system survives when it gives power to those who support it AND are capable of continuing it.
This seems obvious, but it’s a little more tricky than it seems.
Take capitalism: capitalism runs thru greed. It gives power to those who do whatever it takes to make the most money The more money you have, the more power you have. Money is the ability to decide what other people do, not just the ones you hire directly but thru purchasing power. Apple decides what Foxconn does, and heck of a lot of other people it doesn’t hire directly.
Capitalism’s prime directive is “do whatever makes the most money”. Whoever does that successfully also receives the most power.
In a capitalist society people who do not respond to capitalism’s prime direct, do whatever makes the most money, do not get power. Since they have no power, they cannot challenge capitalism.
The catch here is part two of the prime directive, “and are capable of continuing it.”
Capitalism must also run the actual real economy, which consists of people and things: houses, food, sewer systems, airports and so on.
If capitalism fails to run that system effectively, that has real effects which having more money cannot manage.
You see this in the hyperinflation of Weimar Germany. You see this in the Great Depression. You see this now, in America, where parts of the population are seeing absolute declines in life expectancy.
In Capitalism, there is supposed to be a transmission between the real economy and how much money powerful people have: you should get your vast wealth by giving people what they want, and that should be good for the economy, and if it isn’t, you should go bankrupt.
People who pursue money but cannot actually mange the real economy should lose that money, and therefor the power.
This happened in the Great Depression. The rich took their losses, and lost their power (not all of them). The ones who remained were the smarter or luckier ones: the more capable ones.
Still, the magnitude of the disaster was such that Capitalism was in some danger. As many have observed, FDR rescued capitalism.
What happened in 2008 is that a large portion of capitalists lost all their money (and more than all their money). If the capitalist transmission system had been allowed to work, there would not have been a single solvent major bank or brokerage in the United States.
They had fucked up.
BUT they had also bought the politicians and regulators, and were bailed out.
The real economy, which is not GDP, then shifted into a lower state of activity.
This process has been going on for a long time now, since 1980 really. The rich have been getting richer and worse at managing the actual economy.
What should have happened in 2008 was the rich take their losses and power moves to democratically elected officials, as it did in the 30s. But democratically elected officials, handed said power on a platter, refused to take it. (Yes, the Fed, but the Fed can be brought to heel any time either Congress of the President chooses to.)
Democracy, thus, also failed.
A system must give power to those who want to continue it. It must also run the actual society well enough to avoid being overthrown.
Or Dark Ages and Medieval Europe, with forms of feudalism and monarchy surviving crises over many centuries.
Let’s consider the dynamic in a bit of detail.A system survives when it gives power to those who support it AND are capable of continuing it.
This seems obvious, but it’s a little more tricky than it seems.
Take capitalism: capitalism runs thru greed. It gives power to those who do whatever it takes to make the most money The more money you have, the more power you have. Money is the ability to decide what other people do, not just the ones you hire directly but thru purchasing power. Apple decides what Foxconn does, and heck of a lot of other people it doesn’t hire directly.
Capitalism’s prime directive is “do whatever makes the most money”. Whoever does that successfully also receives the most power.
In a capitalist society people who do not respond to capitalism’s prime direct, do whatever makes the most money, do not get power. Since they have no power, they cannot challenge capitalism.
The catch here is part two of the prime directive, “and are capable of continuing it.”
Capitalism must also run the actual real economy, which consists of people and things: houses, food, sewer systems, airports and so on.
If capitalism fails to run that system effectively, that has real effects which having more money cannot manage.
You see this in the hyperinflation of Weimar Germany. You see this in the Great Depression. You see this now, in America, where parts of the population are seeing absolute declines in life expectancy.
In Capitalism, there is supposed to be a transmission between the real economy and how much money powerful people have: you should get your vast wealth by giving people what they want, and that should be good for the economy, and if it isn’t, you should go bankrupt.
People who pursue money but cannot actually mange the real economy should lose that money, and therefor the power.
This happened in the Great Depression. The rich took their losses, and lost their power (not all of them). The ones who remained were the smarter or luckier ones: the more capable ones.
Still, the magnitude of the disaster was such that Capitalism was in some danger. As many have observed, FDR rescued capitalism.
What happened in 2008 is that a large portion of capitalists lost all their money (and more than all their money). If the capitalist transmission system had been allowed to work, there would not have been a single solvent major bank or brokerage in the United States.
They had fucked up.
BUT they had also bought the politicians and regulators, and were bailed out.
The real economy, which is not GDP, then shifted into a lower state of activity.
This process has been going on for a long time now, since 1980 really. The rich have been getting richer and worse at managing the actual economy.
What should have happened in 2008 was the rich take their losses and power moves to democratically elected officials, as it did in the 30s. But democratically elected officials, handed said power on a platter, refused to take it. (Yes, the Fed, but the Fed can be brought to heel any time either Congress of the President chooses to.)
Democracy, thus, also failed.
A system must give power to those who want to continue it. It must also run the actual society well enough to avoid being overthrown.
by Ian Welsh | Read more:
Image: TW Collins
