Capitalism: The End Game

Robert Reich attributes the 2008 recession to the accumulated wealth in fewer and fewer hands. He states that nearly 25% of US earnings go to 1% of the population up from about 7% in the early 1970s. This paradigm is not new. It occurred during the great depression of the 1920s and 1930s, almost identically.

Reich is certainly correct insofar as he correctly posits that such a lopsided accumulation of wealth seriously reduces the middle-class’ buying power thus initiating an economic death-spiral.

The only problem is that if we take an heuristic view rather than a nationalistic / economically adversarial one and view the economy as a world economy, the situation changes. Marx saw the problem  and equated profit with excess production. Reich is essentially expressing an open ended Marxist view but he is a bit myopic. Up to now, profits have been subsidized with underpriced labor and resources from third-world countries and by a growing world population. Population growth expands the consumer market and thus consumes excess production and underpriced resources reduce production costs and add to profits.

Here’s the rub. World population  must eventually stop expanding and, in fact, has started to level off. Additionally, third-world areas of exploitation are now being mined for sales as well. Middle classes are emerging in these areas; India, China, Malaysia … As national economies merge into a world economic gestalt we are obliged to assume the heuristic viewpoint and raise the big question regarding the funding of profit… from where will it come?

Reich optimistically assumes that if there is more equitable distribution of wealth, good times will return for one and all and the social bargain will be restored… again.

Unbridled greed, demand for short-term profits, and the system that was deregulated to encourage those behaviors were not the primary problems. They were only catalysts that served to accelerate the rush to demise. The crash was inevitable. There will eventually be a slow recovery but mean middle class adjusted earnings will be at lower levels than had been the case after the last cycle. Repeat the inevitable cycle again and the recovery will be flatter still until eventually there will be no recovery, only a death spiral from which it will be impossible to pull out.

It is clear the current  greed system cannot succeed.