The three interlocking crises of global capitalism

1 04 2009

As the G20 leaders begin their deliberations today it is worth trying to assess the problems that face them, and us. Everybody has been competing to describe this recession as the worst since the 70s/30s/black death, yet the full scale of the crisis has yet to be properly discussed.  The world is facing three interlocking crises.


Firstly…

The recession is severe, but what makes it worse is that it is happening when the coherence and the credibility of the political elites is at an historical low ebb.  The coexistence of a political with an economic crisis is what makes this recession so dangerous.

The entwining of the political and the economic crises has meant that the world’s response to the recession has been slow and lacking coherence. For example,we are nearly two years into the toxic debt crisis and still the bank bailouts appear to be having very little impact. The weakness and isolation of the political elites has led them to scapegoat  bankers, and by extension the whole financial system of capitalism, as the cause of the problem. This has in turn undermined the bailouts of the banks as investors have become wary of being seen to be making money out of the crisis and governments have become constrained about what they can do for fear of upsetting their voters.


Secondly…
A key element of the crisis is the changing balance of world power. The imbalance between productive economies like China and the less productive economies in the west lies at the heart of the recession. China and others built up huge financial surpluses which were recycled into consumer debt in the west. Now China is demanding that it be recognised as a new global power and wants to see its economic clout recognised by changes in global institutuions like the International Monetary Fund. The very fact that it is now the G20, which includes China and other developing nations, that are meeting today is a recognition of the shift in the balance of power. But changing the way the world is run will be a tricky process as there will be losers as well as winners.


Thirdly…
There is an absence of any alternative to the status quo. This may seem an odd thing to say. Why should an absence of any critique of capitalism be a problem for the system? The answer is that in the absence of contestation the global elites have lost their way. For most of the 20th century the west was driven on by its conflict with the Soviet Union. The technological and scientific breakthroughs that came with the space race, for example, came about because of the US’s determination not to let the Soviet Union put a man on the moon first.

The absence of opposition of any kind to capitalism today has contributed to a sense of drift and general loss of impetus in society in general and has also affected the political elites. The global elites have themselves begun to lose faith in the market system, so much so that the G20 looks to be dominated by arguments about how much global regulation the system needs.

There are other social and natural problems facing the world of course. Huge numbers of people in the world still live close to the breadline. We need to develop new, cheaper and cleaner energy sources. But the three interlocking crises mean that developments in these areas will be held back until politics and politicians themselves are given a new lease of life.

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4 responses

1 04 2009
Robert Hennecke

“The absence of opposition of any kind to capitalism today has contributed to a sense of drift and general loss of impetus in society in general and has also affected the political elites”.

I believe there is indeed a conflict but it is philsophical in the sense of what type of capitalism will succeed, the collectivist Red Chinese version or the individualist liberal democracit of the wests` version.

9 04 2009
sahilvaughan

“coherence and the credibility of the political elites is at an historical low ebb”

Being 24 my experience of the credibility of political elites is somewhat minimal. But the utter faith in Barack Obama and the way he has inspired people even in the UK to take an interest seems incredible. Misplaced or not (and he is undoubtedly reigned in by the structural forces you mention), I don’t think you could have a more credible political elite.

Secondly, I question the TINA prognosis you suggest. There are definitely challenges to contemporary capitalism. It does not help that any suggestions towards reorganisation are always met with McCarthian suspicion of Stalinism.

Also, I think the ‘liquidity glut’ thesis is true but its underpinned by ‘long downturn’ in productivity since the 1970s

Finally, I think that the reaction of spiked-online to the protests both on Sunday and Wednesday is disappointing. Sunday’s march was indeed a trade-union call for New Deal Capitalism (which in a crisis of overcapacity is not a silly notion), but Wednesday’s was a disparate collection, from all walks of life, of people frustrated and angry with really-existing-capitalism. It is so lazy to type cast them as middle-class faux revolutionaries. Some were (not that it matters) lots of others were not. What you did have was very heavy handed police, which I would have thought, should have really irked the libertarians at spiked. But no word of it.

7 06 2009
neil craig

The third point assumes that the status quo under which we are living IS capitalism. In fact, with 50% of the economy being government spending & 50% (fortunately overlapping) being costs produced by government regulation (eg our inability to build nuclear, or use GM, or modular housing, or anything involving alleged safety) we are very far from capitalism. China & indeed Russia are much closer, Hong Kong & Taiwan closest & I submit they are not only providing competition but whipping our collective (?) asses.

Until we recognise that the problem is to much overbearing statism we cannot get about solving it.

25 07 2009
Robert Hennecke

Neil Craig is telling it like it is, hyper-regulation and the tendency for risk aversion are creating a defensive stance that ultimately leads to dividing up ever shrinking pies. The wild west scenario of the former and the communist countries of Russia and Red China is exactly the kind of environment where basically almost anything goes is where the growth of the future lies for better or worse.

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