Sunday, July 27, 2014

Capitalism’s Deeper Problem | Perspectives |

Recent press reports refer to troubling price increases for such assets as real estate, government bonds, companies targeted for acquisition and artwork. A New York Times front-page headline read “The Everything Boom, or Maybe the Everything Bubble.”

Yet while asset prices soar, the production of goods and services, employment and workers’ incomes are not recovering and resuming growth. Instead, Western Europe, North America and Japan are stuck in a longer, deeper crisis than almost anyone expected. Millions have left the labor force. Wages, benefits and job security are declining; the so-called “middle classes” are evaporating. Having promised “recoveries,” desperate governments inject massive new quantities of money into their economies. What they accomplish most are fast-rising asset prices.

Given their persistent economic problems, consumers cannot borrow or spend more. Businesses neither borrow nor productively invest all the new, cheap money because they could not sell the extra output to distressed consumers. Instead, the newly injected trillions enable the speculation that drives up asset prices. The owners of those inflating assets celebrate a “recovery” that bypasses most of their fellow citizens. The Great Recession lumbers on.

To understand this puzzling and dangerous situation requires digging deeper than most current discussions of our economic problems. The global crisis since 2007 has captivated discussion about capitalism as a system. Yet we are faced now with more than just this latest of capitalism’s endlessly recurring “downturns” (or recessions or depressions). We see combined an extremely serious downturn in most of capitalism’s old centers, extremely unequal growth in its new centers and a resurgent global speculative bubble. This points to a deeper, worldwide problem that now challenges and threatens contemporary capitalism.

From its beginnings as the emerging, dominant class structure in 18th century England, capitalism concentrated production geographically in what were or became urban areas. This persisted as capitalism spread through Western Europe, North America and Japan. Capitalist growth in urban areas not only drew food, raw materials and laborers from the surrounding countryside, it also generated deepening divisions between town and country. The workers who gathered in industrial towns eventually mobilized and fought successfully for rising wages rarely matched by rural incomes. Urban laborers became an organized, disciplined, productive and relatively well-paid working class.

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