Much has been said recently in the Financial times series on
capitalism and in letters in response to this series about the history
and future of capitalism. Most of the proposals for change have been
made in the context of the very shallow time frame of the past
half-century and almost all have related to two ideological
perspectives, 1. the “do nothing, government is the problem” free
market view, and 2. the regulatory approach of managing the excesses of
the market, and that mainly of the financial sector. Interviews on CNN
with economists at Davos (for example, those by Fareed Zakaria) result
in the same solutions: we can grow out of the crisis producing new
industries and more taxes or the business cycle with turn and
prosperity will return. This was the view of economist Schumpeter
(1939) who saw capitalism’s need for innovation and destruction (of
inefficient firms and technologies) to avoid stagnation and grow out of
inherent cyclic events like the long Kondratieff or short Kitchin. What
is missing today is a longer assessment and a new theoretical framework.
The major forms of the present crisis have appeared as a credit and
debt bubble (assessed as a regulatory failure) and a growing
inequality. Both these features of the crisis have been recurrent in
economic panics and depressions for over 300 years. An earlier
generation tried to set these deficiencies of capitalism in context,
usually by analysis of money and credit (e.g. Rist, 1938). However, if
we look further we find that they are associated with stages in the
development of capitalism in its several historic appearances, most
recently in the Roman example described by Rostovtzeff (1957). The
foundations of this development begin with the peasant economy, like
America’s pioneer period and settlement, and then a growing mercantile
class which steered government policy into foreign wars to control
exports and imports (e.g., wine and olive products) and then the
degradation of the peasant economy due to market manipulation,
pressures of the peasantry to fight the wars and their inability to
sustain economic independence in the face of cheap imports. Finally
the financial monopoly of the profits of empire and industry into a
shrinking elite and impoverishment of the peasantry into urban cheap
labor stripped of property.
This scenario was earlier seen in many of the city-states of the
Greeks and residual empires of Alexander the Great’s generals as
Rostovtzeff shows in his economic analysis of the classic Greek states
(1953). In each case the struggle bled the social order of treasure
and productivity ending in collapse or conquest by external forces.
The modern history of capitalism can be seen in this context with the
struggle of consolidation of wealth producing the haves and have-nots
with the resulting creation of the Soviet Union nothing more than a
larger example of the popular movements of Greece who often gained
control of cities, or the rise of the popular party in Rome with the
eventual victory of Augustus.
I suggest we are in one of the late states of this new capitalist
structure and the only difference is the technology and number of
people which appears to make the cycle more varied and shorter between
crises. It also seems to me that we can expect some major adaptation
due to the fact that Western capitalism has been constructed on a
general cultural base for the past 2,500 years of its several
historical forms. With the addition of other cultural influences this
may change. China, for example, may create a new departure to modify
the vector of past stages in the deterioration of the capitalist
economy.
The “global” capitalist economy of the Roman Empire was strong
enough to sustain multiple challenges of military, disease, and natural
disaster in character. Eventually, the degradation of the system
produces, in each new challenge, a less sustainable response as Joseph
A. Tainter has eloquently described in his book, The Collapse of
Complex Societies (1988).
No earlier capitalist system has been capable of solving the
inherent problem of inequality which appears to be at the center of the
degradation process. If we are to adapt, some solution must be found,
but even if it is the political resistance can prevent the success of
any solution, and we will repeat the process to exhaustion as in each
previous capitalist example.