Friday, 3 September 2010

‘The Long Emergency’, capitalism in PERIL

By Peter de Waal

James Howard Kunstler seems to have absorbed the ideas of Grant Morgan’s essay about the collapse of capitalism I forwarded to him some months ago:

Kunstler’s version is encapsulated in his latest on-line Pod cast – “KunstlerCast #122: A Grand Wobble”:

At almost 49 minutes it is nearly a verbatim transcript of the essay’s key ideas. There are a few differences. Kunstler is unable to admit that “The Long Emergency” as he calls it could also mean the end of the capitalistic economic order as Grant suggests. You would expect that from an individual who describes himself as a “left-democrat.” Politics in the US seems unable to find another perspective. As Gore Vidal put it so succinctly: “America is a country governed by a single political party with two right wings.”

Kunstler is also fixated on the paramount importance of the “peak oil” crisis as the key to understanding the current situation capitalism finds itself in. Capitalism certainly is facing energy crises, but if you stop there you would fail to see the other four crises baring down on the system:

• Profitability crisis – squeezing the lifeblood of capitalism, capitalism has always had a "free lunch" from the earth and workers, now that’s over

• Ecological crisis – undermining the natural basis for civilisation

• Resource crises –  oil, water, food, minerals, land, you name it

• Imperial crisis – US Power is declining, but global capitalism cannot support a bigger hegemon. Forget China – it can’t happen

• Legitimacy crisis – both the leaders and the led are loosing faith in capitalism's destiny as it becomes more transparently undemocratic

This is our PERIL thesis. Essentially the system has a number of problems that it can't resolve. Political systems can withstand one or two problems and work around them, but this is five all at the same time with no solutions available. Typically this is how civilisations end.

Kunstler has an Americo-centric viewpoint. As my good friend Danny puts it: “You can’t read the label if you’re inside the bottle.” He would know, he’s from Texas, which generally has a reputation of being very inward looking and captured by Fox-thought from Chairman Murdoch. (not our Danny though, he’s a gem!)

To a dweller in the southern ocean like me, the issue is not just the problem with this or that aspect of capitalism in America, it’s the whole damn system that’s in trouble world-wide.

At one point Kunstler claims that financial speculation is counter-productive to the needs of humanity and what is instead needed is investment in the manufacture of real, useful products. This is ignoring the reason that capitalism turned in the late 1970s to financialisation in the first place, that is the falling rate of profit from investment in the production of ‘real objects’ due to market saturation.

To deal with the problem of working class power and union organisation in the 1970s, raising wages in absolute terms and reducing profitability, manufacturing jobs were off-shored to brutal police states, like China. This created the problem of falling consumption, threatening the survival of the system.
The answer was to lend Western workers and the middle classes, professionals and small businesses money via easy-credit schemes to maintain consumption, and therefore keep the third-world factories running.

This is called “compensatory borrowing” by economists and was funded by creating massive inflation, particularly in the housing markets. Vast quantities of fictitious capital was created by “fractional reserve banking systems” and loaned out. The crisis of 2007-08 was about the loss of nerve amongst lenders, because it became impossible to disguise the fact that off-shored manufacturing and an economy of casualised low-pay jobs in the “service sector” means that the money loaned to the West can never be paid back.

Essentially what we have is an economy that is a world-wide Ponzi scam. Unless “growth” can be maintained, asset values will plummet, halting the circulation of capital, world trade, etc. Sound familiar?

At the end of his PodCast Kunstler admits that the reason Obama is so quiet at the moment is that he probably realises or has been told that the US economy is totally dependent on profits from the financialisation industry. Quite an admission and a key idea from Grant’s thesis.

Still, listen to James Howard Kunstler on financialistion if you have the time. It’s a very good summary of how things are being run at the moment, an essentially is an admission that capitalism can’t fix it’s problems.

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