By Ray Williams
Capitalism is facing at least three major crises. A pandemic-induced health crisis has rapidly ignited an economic crisis with yet unknown consequences for financial stability, and all of this is playing out against the backdrop of a climate crisis that cannot be addressed by “business as usual.”
This triple crisis has revealed several problems with how we do capitalism, all of which must be solved at the same time that we address the immediate health emergency. Otherwise, we will simply be solving problems in one place while creating new ones elsewhere. That is what happened with the 2008 financial crisis. Policymakers flooded the world with liquidity without directing it toward good investment opportunities. As a result, the money ended up back in a financial sector that does little to help the economic well-being of the general population.
We have now reached a point in the twenty-first century in which the externalities of the capitalist system, such as the costs of war, the depletion of natural resources, the waste of human lives, the inability to marshal resources efficient to meet the pandemic and the disruption of the planetary environment, now far exceed any future economic benefits that capitalism offers to society as a whole. The accumulation of capital and the amassing of wealth are increasingly occurring at the expense of an irrevocable rift in the social and environmental conditions governing human life on earth.
Less than two decades into the twenty-first century, it is evident that capitalism has failed as a social system. The world is mired in economic stagnation, financialization, and the most extreme inequality in human history, accompanied by mass unemployment and underemployment, precariousness, poverty, hunger, wasted output and lives, and what at this point can only be called a planetary ecological “death spiral.”
The COVID-19 Pandemic
COVID-19 has accentuated as never before the interlinked ecological, epidemiological, and economic vulnerabilities imposed by capitalism. As the world enters the third decade of the twenty-first century, we are seeing the emergence of catastrophe capitalism as the structural crisis of the system takes on planetary dimensions.
COVID-19 and SARS-CoV-2, like other dangerous pathogens that have emerged or reemerged in recent years, is closely related to a complex set of factors including: (1) the development of global agribusiness with its expanding genetic monocultures that increase susceptibility to the contraction of zoonotic diseases from wild to domestic animals to humans; (2) destruction of wild habitats and disruption of the activities of wild species; and (3) human beings living in closer proximity.
John Bellamy Foster, editor of Monthly Reviewand a professor of sociology at the University of Oregon, and the author, most recently, of The Robbery of Nature: Capitalism and the Ecological Rift and Intan Suwandian assistant professor of sociology at Illinois State University and author of Value Chains: The New Economic Imperialism argue the following:
- The ripple effects of combined ecological and epidemiological disasters have disrupted the entire system of global production. The effect of lockdowns and social distancing, shutting down production in key sectors of the globe, has shaken supply/value chains internationally. This has generated a gigantic “bullwhip effect” rippling up from both the supply and demand ends of the global commodity chains.
- According to the estimates in early April by the World Trade Organization, the economic fallout from the COVID-19 pandemic would lead to a drop in annual world trade in 2020 by 13 percent in the more optimistic scenario, and by 32 percent in the more pessimistic scenario. In the latter case, the collapse of world trade would equal in one year what happened in the Great Depression of the 1930s over a three-year period.
- The rift in world ecology has attained planetary proportions and is creating a planetary environment that no longer constitutes a safe place for humanity. New pandemics are arising on the basis of a system of global monopoly-finance capital that has made itself the main vector of disease. State systems everywhere are regressing toward higher levels of repression, whether under the mantle of democracy or dictatorship.
The key to understanding responses to Covid-19 is the question of the purpose of our economy. Currently, the primary aim of the global economy is to facilitate exchanges of money. This is what economists call “exchange value”.
The dominant idea of the current system we live in is that “exchange value” is the same thing as “use value”. Basically, people will spend money on the things that they want or need, and this act of spending money tells us something about how much they value its “use”. This is why markets are seen as the best way to run society. They allow you to adapt, and are flexible enough to match up productivity capacity with use value.
What Covid-19 is throwing into sharp relief is just how false our beliefs about capitalism are. Around the world, governments fear that critical systems will be disrupted or overloaded supply chains, social care, but principally healthcare. We have a crisis in health and social care, where people are often forced out of useful jobs they enjoy because these jobs don’t pay them enough to live.
People are compelled to work pointless jobs because in a society where exchange value is the guiding principle of the economy, the basic goods of life are mainly available through markets. This means you have to buy them, and to buy them you need an income, which comes from a job.
The other side of this coin is that the most radical (and effective) responses that we are seeing to the Covid-19 outbreak challenge the dominance of markets and exchange value. Around the world governments are taking actions that three months ago looked impossible. In Spain, private hospitals have been nationalized.In the UK, the prospect of nationalizing various modes of transport has become very real. And France has stated its readiness to nationalize large businesses.
Likewise, we are seeing the breakdown of labor markets. Countries in Europe, and in Canada and the U.S. are providing people with an income in order to stop them from going to work. This is an essential part of a successful lockdown. While these measures are far from perfect, they are a shift from the principle that people have to work in order to earn their income, and a move towards the idea that people deserve to be able to live even if they cannot work.
This reverses the dominant trends of the last 40 years. Over this time, markets and exchange values have been seen as the best way of running an economy. Consequently, public systems have come under increasing pressure to “marketize,” to be run as though they were businesses who had to make money. Likewise, workers have become more and more exposed to the market – zero-hours contracts and the gig economy have removed the layer of protection from market fluctuations that long term, stable employment used to offer.
There has been a broad economic consensus for 40 years. This has limited the ability of politicians and their advisers to see cracks in the system, or imagine alternatives. This mindset is driven by two linked beliefs:
- The market is what delivers a good quality of life, so it must be protected.
- The market will always return to normal after short periods of crisis.
These views are common to many Western countries. But they are strongest in the UK and the US, both of which have appeared to be badly prepared to respond to Covid-19.
Viruses are part of nature. They have attacked human beings—sometimes dangerously—in both distant and recent history. In 1918, the Spanish Flu killed nearly 700,000 people in the United States and millions elsewhere. Recent viruses include SARS, MERS and Ebola. What matters to public health is each society’s preparedness: Stockpiled tests, masks, ventilators, hospital beds, and trained personnel to manage dangerous viruses. In the US, such objects are produced by private capitalist enterprises whose goal is profit. It was not profitable to produce and stockpile such products, that was not and still is not being done.
Nor did the US government produce or stockpile those medical products. Top government personnel privilege private capitalism; it is their primary objective to protect and strengthen. The result is that neither private capitalism nor the US government performed the most basic duty of any economic system: To protect and maintain public health and safety. US capitalism’s response to the coronavirus pandemic continues to be what it has been since December 2019: Too little, too late
Most US and UK politicians carefully avoid any criticism of capitalism. They all debate the virus, China, foreigners, other politicians, but never the system they all serve. When Trump and others urge people to return to churches and jobs—despite risking their and others’ lives—they place reviving a collapsed capitalism ahead of public health.
Alternative systems—those not driven by a profit-first logic—could manage viruses better. While not profitable to produce and stockpile everything needed for a viral pandemic, it is efficient. The wealth already lost in this pandemic far exceeds the cost to have produced and stockpiled the tests and ventilators, the lack of which is contributing so much to today’s disaster. Capitalism often pursues profit at the expense of more urgent social needs and values. In this, capitalism is grossly inefficient. This pandemic is now bringing that truth home to people.
Of course, the top priority now is to put public health and safety first. To that end, employees across the country are now thinking about refusing to obey orders to work in unsafe job conditions. A close second priority is to learn from capitalism’s failure in the face of the pandemic. We must not suffer such a dangerous and unnecessary social breakdown again. Thus system change is now also moving onto today’s social agenda.
The COVID-19 crisis is exposing flaws in America’s economic structures, such as the increasing precariousness of work, owing to the rise of the gig economy and a decades-long deterioration of workers’ bargaining power. Telecommuting simply is not an option for most workers, and although governments are extending some assistance to workers with regular contracts, the self-employed may find themselves left high and dry.
The US government is now extending loans to businesses at a time when private debt is already historically high. In the United States, total household debt just before the current crisis was $14.15 trillion, which is $1.5 trillion higher than it was in 2008. And lest we forget, it was high private debt that caused the 2008 global financial crisis.
Unfortunately, over the past decade, many countries have pursued austerity, as if public debt were the problem. The result has been to erode the very public-sector institutions that we need to overcome crises like the coronavirus pandemic.in the US – which has never had a properly funded public-health system – the Trump administration has been persistently trying to cutfunding and capacity for the Centers for Disease Control and Prevention, among other critical institutions.
On top of these self-inflicted wounds, an overly “financialized” business sector has been siphoningvalue out of the economy by rewarding shareholders through stock-buyback schemes, rather than shoring up long-run growth by investing in research and development, wages, and worker training. As a result, households have been depleted of financial cushions, making it harder to afford basic goods like housing and education.
The bad news is that the COVID-19 crisis is exacerbating all these problems.
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