Karl Marx’ famous prediction that capitalism would sow the seeds of its own destruction has been roundly mocked over the years and for good reason. State communism atrophied and ultimately collapsed; market economies produced unrivaled technological breakthroughs that increased standards are living around the world. Marx’ assumptions about the future were not borne out, largely because society and the economy continued to adapt in unpredictable ways.
But it increasingly appears that Marx’ detractors should take some pause for reflection. Capitalism itself dictates that competition is essential to a proper functioning marketplace, but few gave much thought to what would happen when capitalism itself held a monopoly on world economies. When the wealthiest beneficiaries of capitalist countries had to worry about the possibility of worker revolts and forced redistribution, they created a system of paternalistic capitalism in which workers (well, mostly white, mostly male workers–but such were the times) had much more secure employment, higher wages, lower cost of living, a robust pension system and many other benefits both private and public. These contrivances toward human dignity helped keep people happy and the pitchforks at bay when alternatives to the system were a distinct possibility.
Today, however, capitalism finds itself unrivaled and the consequences are grim. Inequality is rampantly increasing, wages are depressed in most of the developed world, the climate is veering toward uninhabitability for the human race and many other species, multinational corporations are dictating policy to entire nations, and civil unrest is growing. Too much money in too few hands have joined with a destructive ideology of macroeconomic austerity to create a global culture of perceived economic scarcity: people are increasingly told that we cannot afford pensions, or healthcare, or education, or many other basic dignities that were once considered an automatic birthright of citizenship. Just keeping a roof over one’s head is astronomically expensive compared to yesteryear. Combined with a series of refugee crises exacerbated in part by climate change, this artificial lack of resources caused by the looting and hoarding of the obscenely wealthy is having the catastrophic social effect such things always do: an increased virulence of racism and prejudice as fearful ethnic majorities attempt to regain their former prestige and hold onto their share of whatever is left.
And that doesn’t even begin to touch the combined effects of globalization and automation in downscaling and ultimately destroying the demand-side consumer base that makes the fundamentals of capitalism possible. Levi’s can make a pair of jeans dirt cheap in developing countries and then ultimately hire robots to do it instead while still selling them at $200 a pair. But who in the end will be left to buy them? The jet set can only consume so many goods and services while the rest of the population is immiserated, after all.
Obviously, sunsetting half the world into totalitarianism in order to make capitalists voluntarily do the right thing isn’t a desirable option. Modern democracies will have to look within to find new models and approaches that reject the xenophobic fears and hatreds stoked by the right, while still moving to a new model that works for real people and not just the very rich.
Solutions like guaranteed jobs and universal basic income are sexy and attention-grabbing, but the rules of the market themselves also require changing.
Free market advocates like to describe the government as a parasite on the market, but the reverse is true. In healthy democracies, governments are merely the representatives of the people’s will, designed to protect the sweak from the powerful and purchase or create crucial goods and services that the market left to its own devices will not. Furthermore, markets exist not in automatic theoretical state but through rules implemented by society. We decide, for instance, that ponzi schemes are not allowed to operate, that people cannot be exploited to sell their organs, that addictive hard drugs must be banned or regulated, and so on.
The corporation itself, long considered an inviolable natural entity by conservatives, is itself an artificial legal entity sanctioned by society and its representatives. Nothing in nature demands that the owners of corporations be legally shielded from the consequences of their actions, or that the full costs of their operation should be externalized onto taxpayers, or that they should pay lower tax rates than real people. Nothing in nature demands that corporations be operated purely on behalf of their shareholders rather than on behalf of their workers and the public trust. These are all things that modern industrialized society decided in a more or less corrupted fashion, artificial rules that are kept in place by the rich and powerful as if they were acts of God and laws of nature. They are neither.
Senator Elizabeth Warren has taken some bold steps to try to fix some of these broken rules and save capitalism from itself in the United States. Nor are her proposals exactly even radical: many of her proposals are already in place in other developed capitalist countries such as Germany. Some of the worst trends in capitalism, such as shareholder value theory, are actually fairly new but considered as gospel by business tycoons and Chicago-school economists. They are not impossible to reverse, and they are badly needed. All that is missing is political will.
Here’s a sample of Warren’s proposed reforms:
Corporations have a “feedback loop”, according to Warren, in which executives receive shares in a company “as a reward for producing short-term share-price increases”. That, Warren says, is one of the reasons why the average chief executive of a big company makes 361 times what an average worker makes. In 1980, a top CEO made 42 times the average worker’s wage.
The bill would eliminate those incentives and give workers more of a voice on company boards. Companies with more than $1bn in annual revenue would be required to have employees elect 40% of directors, and have the approval of 75% of directors and shareholders before making any political donations.
Giving workers a seat at the corporate table is only a small portion of the fixes that will be necessary in the years. But to American conservatives, of course, it seems like the second coming of Joseph Stalin. The center-left will pooh-pooh the plan as a unicorn fantasy. It’s always thus.
But as with climate change mitigation and so much else, the cost of not taking these steps will be far higher than the cost of taking them–including for the ultra-wealthy. Continuing the status quo is not an option. The demand side of the economy will sputter further, market instability will increase, ethnic hostility and racist revanchism over perceived resource shortages will increase worldwide, environmental catastrophies will multiply and bloody revolutions are inevitable.
Her critics will compare her to history’s worst collectivist dictators. But Warren’s plans are the only way to save capitalism from the reaping the matured seeds of its own destruction.
