The Return of Capitalism's Contradictions


The Great Recession and its aftershocks have confounded the idea that capitalism has reached a plateau of smooth and unending growth. Its future as a prosperity machine has been cast into doubt. No longer infused with a sense of promise, capitalism now provokes feelings of dread and fatalism. How can social ecology respond to economic uncertainty and decline? An essay from the book, Social Ecology and Social Change

One of the animating beliefs of twentieth century social ecology was that capitalism had tamed its dangerous contradictions. “The unprecedented fact remains that capitalism has been free of a ‘chronic’ crisis for a half century,” wrote Murray Bookchin in his 1989 essay, Radical Politics in an Era of Advanced Capitalism “Nor are there signs that we are faced in the foreseeable future with a crisis comparable to that of the Great Depression,” he went on. “Far from having an internal source of long-term economic breakdown that will presumably create a general interest for a new society, capitalism has been more successful in crisis management in the last fifty years than it was in the previous century and a half.”

Indeed, a robust, incessantly growing capitalism, shorn of past weaknesses and instabilities, was precisely the nub of the problem. With the help of the state and Keynesian economic innovations, capitalism had subdued its internal contradictions. But this success left in place a “new, perhaps paramount” external contradiction. The “clash”, as Bookchin put it, “between an economy based on unending growth and the desiccation of the natural environment.”

It is true that social ecology did not exclude the possibility that capitalism could relapse into a chronic stagnation nor believe that the system’s contradictions had somehow vanished. Bookchin regarded capitalism as “one of the most unstable economies in history” and inherently unpredictable. But the “traditional radical notion” that periodic or chronic crises would unfailingly occur was “uncertain”, he averred, and the prospect of capitalism sinking into a “major chronic crisis” remained unexpected.

We need to face the fact that the unexpected has happened, and both capitalism’s internal and external contradictions have come to the fore. I believe the economic events of the last few years have demonstrated that, in the advanced capitalist countries, rumours of the death of capitalism’s contradictions have been greatly exaggerated. The crisis that has emerged is unmistakably chronic in character and cannot be mistaken for a periodic downturn. This has important implications for how a post-capitalist, ecological movement relates to masses of people whose material underpinnings are declining and unstable.

But it is equally important to recognise that, contrary to the hopes of leftists in previous eras, crisis and stagnation does not mean that capitalism is about to self-destruct. Nor are there legions of class-conscious proletarians ready to, in Marx’s famous words, “expropriate the expropriators”. What makes this crisis unique is that it has emerged after capitalism has vanquished all meaningful opposition, borrowed deeply into society, and expanded across the globe.

Growing Pains

We should proceed from an agreement as to what capitalism is. In line with social ecology, I’d argue that capitalism is primarily a system in which money is invested to make more money, and so on ad infinitum. This creates an insatiable necessity for growth. Zero-growth capitalism is a contradiction in terms. “To keep to a satisfactory growth rate right now would mean finding profitable opportunities for an extra $2 trillion compared to the ‘mere’ $6 billion that was needed in 1970,” says Marxian geographer David Harvey. “By the time 2030 rolls around, when estimates suggest the global economy should be worth more than $96 trillion, profitable investment opportunities of close to $3 trillion will be needed.”

But in the core, advanced capitalist countries – the US, Western Europe and Japan – the growth rate, though still positive, has not been satisfactory for some time. Between 2001 and 2011, the rate of economic growth in the US was 63% below that of the 1960s. In Japan, growth between 1973 and 2008 was just one quarter of the level it reached between 1950 and 1973. In Western Europe, it has contracted by more than half. In the UK, the rate of GDP growth was 2.7% in the 1980s, 2.2% in the 1990s, 1.8% between 2000 and 2010 and 1.3% between 2010 and 2014. In the core countries, decline is in evidence virtually everywhere.

There are differing theories as to what lies at the root of this stagnating growth. One culprit that looms large in many explanations is a drop in the purchasing power of the mass of people. A 2011 report from the UK Resolution Foundation, Painful Separation, describes an extreme “decoupling” of average incomes from the rate of economic growth. Since the 1970s, the report says, median pay has grown at less than half the rate of economic output in the US, Canada and Australia. In Britain, France and Germany, median pay tracked economic growth for a long period, but, in the past decade, has increased by less than half the growth rate. Only in Scandinavia and Japan has the divergence between economic growth and average pay been “mild”, the report concludes. In recent years, this contraction of wealth has been intensified. According to the US Russell Sage Foundation, the net wealth of the typical American household declined by a staggering 36% between 2003 and 2013. In the UK, real wages, the value of wages when you factor in the effect of inflation, have dropped by 8.5% since 2009, the largest fall since the 19th century. Four out of ten of the new jobs ‘created’ in Britain since 2010 are self-employed and well-paid managerial posts are being replaced by more ‘elementary’ jobs such as cleaning.

So you are left with a stand-off between two intractable features of the economy. On the one side, a ‘wall of money’ (as one English economist, Harry Shutt, puts it), demanding more and more profit-generating opportunities and, on the other, the declining purchasing power of the majority of people. This is not a recipe for economic health. The unavoidable consequences are, in the absence of productive investment for which demand is lacking, an increase in speculation (the buying of assets, currency futures or collaterized debt obligations for example, in the hope their value will rise), and spiralling household debt. These are both prime underlying causes of the 2007-9 economic crisis, and revealingly, nothing that has happened subsequently has done anything to ameliorate them. It can be argued that privatisation, which began in the 1980s, was another way to utilise all this ‘surplus capital’. But state-owned services and assets are obviously a finite resource. And despite the best efforts of governments like that of the UK, the gravy train cannot go on forever.

It is very hard to escape from this situation. To do so would require reversing the war on organised labour that has occurred since the 1970s, and I can sense no appetite among employers to do this, or placing restrictions on credit and raising interest rates, which though they may reduce household debt, would have the unfortunate side effect of sinking the economy.

Given this, the official government reaction has been to put the economy on life support through the printing of enormous sums of money (officially known as Quantitative Easing), pioneered by Japan and now part of the economic toolkit of the US, UK and most recently, the European Central Bank. This is done in conjunction with near zero interest rates, which makes the borrowing of money incredibly cheap. Meanwhile, the political and economic authorities feel they have no option but to reboot and reinstall the casino economy.

But if nothing is done to change the underlying conditions which brought forth economic crisis, merely a smoothing over of the cracks, then the extreme likelihood is that further crises will erupt in the near future. In fact, the current crisis has yet to play itself out fully, as the economic torpor in the Eurozone aptly demonstrates. Not for nothing is this called ‘the Great Recession’. The economic engine of capitalism is clearly sputtering, despite huge government action and financial rescues. The successful “crisis management” that, at the end of the 1980s Bookchin credited capitalism with, has been transformed into a series of desperate measures. Capitalism’s contradictions, thought to have been banished to the history books, have emerged resurgent.

Not a time machine

However, there are important caveats to be made before we become engrossed in making comparisons with the last great crisis of capitalism, the Great Depression of the 1930s. The first concerns poverty. The inhabitants of the wealthy core capitalist countries are clearly getting poorer but, in the main, they cannot be classed as poor. Contrary to the predictions of Marxism, the working class in these countries enjoyed burgeoning wealth throughout most of the twentieth century, particularly in the decades after the Second World War. According to the economist Thomas Piketty, whose book Capital in the 21st Century predicts growing inequality in the coming decades, the emergence of what he terms a “patrimonial middle class” in the 20th century should not be underestimated. Tens of millions of individuals in Europe or 40% of the population, says Piketty, “individually own property worth hundreds of thousands of euros and collectively lay claim to one-quarter to one-third of national wealth: this is a change of some moment.” These people are not destitute and “do not like to be treated as poor”, Piketty asserts. Despite the fact that the 1%, and especially the 0.1%, seem to inhabit a different universe, both materially and spiritually, to the rest of us, we haven’t suddenly jumped in a time machine and travelled back a hundred years to an era when the top 10% owned virtually everything and the bottom 90% nothing. So Bookchin was not being blinkered when he noted in the 2002 essay The Communalist Project that “almost 50% of American households own stocks and bonds, while a huge number are proprietors of one kind or another, possessing their own homes, gardens and rural summer retreats.” It is just that, many millions of people in the wealthy countries are now going, in the words of one recent book, “down the up escalator”.

The second qualification is that low growth and recurrent economic crises are malaises that seem peculiar to the wealthy capitalist countries. Yes, China was affected by the global financial crisis and economic growth slowed there, but it still reached over 7% in 2012. China, with its chronic air pollution reducing life expectancy, is contending with problems generated by a vigorous capitalism, not a faltering one. Likewise, the Turkish economy expanded by 8.5% in 2011. So called ‘emerging markets’ have the advantage of increasing populations and a rising middle class. Economically speaking, they are more sustainable.

But the most important caveat to understand is that a dysfunctional capitalism displaying contradictions that are harder and harder to hide, is not simply going to disappear. Bookchin’s departure from the Marxist orthodoxy of the early twentieth century stemmed from an exasperation with the idea that, because of its internal development, capitalism would inevitably collapse and give way to socialism. This old leftist conviction was entwined with a resolute faith that a class conscious working class would be ready and willing to take over when capitalism faltered, and guide society to a communist future. “For generations,” Bookchin wrote in his 1989 book, Remaking Society, “radical theorists opined about the ‘inner limits’ of the capitalist system, the ‘internal’ mechanisms within its operations as an economy that would yield its self-destruction. Marx gained the plaudits of endless writers for advancing the possibility that capitalism would be destroyed and replaced by socialism because it would enter a chronic crisis of diminishing profits, economic stagnation and class war with an ever-impoverished proletariat.”

What makes the current period of economic stagnation and chronic capitalist crisis unique in historical terms is that, in the palpable absence of a revolutionary alternative, capitalism shows no signs of self-destructing or meekly conceding to “socialism”. It was, ironically, Lenin who remarked that there were no “absolutely hopeless situations” for capitalism. And the present situation is far from hopeless. Capitalism will, despite its attendant shocks and contradictions, and despite growing evidence in its heartlands of stagnation and decline, inexorably go on. There is no such thing as a “last stage” of capitalism while capitalism still exists. The last stage can only be identified retrospectively when, and if, it is replaced by another economic system. The system will not jump, it has to be pushed. And no-one is pushing.

The fact is that the overwhelming majority of people, even in the wealthy countries, are wage and capital dependent. They need jobs and money and a functional economy. This means that they have a clear interest in re-installing the economic system whenever it breaks down. “So long as the basic institutions of capitalism remain in place, it is in rational self-interest of almost everyone to keep the capitalists happy,” wrote American mathematician David Schweickart in his 2002 book, After Capitalism. “Economic growth is in the immediate interest of virtually every sector of society – growth in the straight-forwards sense as measured by GDP”.

This truth holds in spite of low growth and recurrent recessions or crises. Consider the clamour to do ‘whatever it takes’ to restore business as usual after the 2008 crash when the system really did threaten to break down and there was the immediate danger of ATM machines not dispensing cash and companies not being able to pay their workforce. With no alternative on the horizon, political elites were always going to intervene with trillions of dollars of taxpayers’ money. That is why it’s presumptuous to describe any of capitalism’s increasingly visible contradictions as fatal. The aforementioned David Harvey, lists 17 contradictions of capital in his latest book, but maintains only one of them is “potentially fatal”. “But it will turn out so,” he elaborates, “only if a revolutionary movement arises to change the evolutionary path that the endless accumulation of capital dictates. Whether or not a revolutionary spirit crystallises out to force radical changes in the way in which we live is not given in the stars. It depends entirely on human volition.”

So is there any value in being aware of capitalism’s resurgent contradictions if they are probably not fatal and even if they result in economic breakdown, simply produce a clamour on the part of the public as well as elites to restore the system to, if not health, at least basic functionality? The point, I would suggest, is that there is a crying need for a post-capitalist, ecological movement to articulate an alternative to a capitalism that is seriously not delivering for millions of people, and not delivering in a way that hasn’t been true since before the Second World War. I was brought up with the idea that, although capitalism may have terrible side effects, it delivered the goods in terms of rising wealth and consumerist distractions. That, from where I’m sitting, is simply not the case anymore. Whereas, not so long ago, politicians promised a better future, however much those promises were empty PR flannel, now their message is conspicuously negative. Politics has become nasty and vicious (and in its treatment of the unemployed and the disabled verging on the sadistic) and all about adapting to the demands of a creaking economy. Forget the sunlit uplands, the future comprises differing gradations of pain.

Dread and Fatalism

I believe a social ecology and assembly democracy movement that wishes to thrive and become a genuine rival to capitalism has to respond to this new situation and mood. If I were to crudely summarise the message of social ecology up to this point, it is along the lines of capitalism incessantly grows, creating soulless and energy draining urbanisation and megacities. And at the same time as it destroys the natural environment and pollutes, the market economy steadily remakes society in its own image, commodifying more and more aspects of life and imposing a buyer-seller relationship. But explicit within the concept of ‘post-scarcity’ was the assumption that the material foundations of people in wealthy capitalist countries were assured.  The post Second World War era, Bookchin wrote, was infused with “a buoyant sense of promise” and this feeling of optimism was “clearly materialistic. A radical ethic developed, he asserted in Remaking Society, possessed of “the reasonable certainty that the abolition of oppression in any form – of the senses as well as of the body and mind – could be achieved even on the bourgeois grounds of economic instrumentalism.” The trouble with the capitalist machine, as well as its potential, was not its internal contradictions, but that it had become remarkably stable and successful. I am not arguing that capitalist growth is no longer a problem. Even during the ‘crisis years’ of 2008 to 2012, the advanced capitalist countries grew by around 1% a year, which is high by long-term historical standards. Economic stagnation in Japan has been accompanied by a rise, not a fall, in carbon emissions. And commodification has, if anything, intensified post-crash as the rich countries try to resuscitate growth. However, what cannot be ignored is that capitalism is no longer the prosperity machine of old for millions of people in the rich countries. A growth in absolute poverty, mass unemployment, under-employment, low-paying self-employment, declining incomes, housing precarity and evictions, and a disavowal of responsibility to vulnerable people dependent on vanishing state welfare benefits, are all features of this new landscape. The buoyant sense of promise Bookchin discerned in the spirit of the 1960s has been transformed into virtually its polar opposite – an atmosphere of dread and fatalism.

What this signifies is that if social ecology wishes to really make headway as a movement for ecological transformation, it needs to invigorate its social dimension. It is revealing that, Kurdistan aside, the outbreaks of assembly democracy that have occurred in recent years have all taken place in countries suffering from economic breakdown and trauma – namely Argentina, Greece and Spain.  In addition to assemblies of indignatos, co-operative economic alternatives, in energy, food and housing, for example, have flourished in Spain post-crash, partly for the prosaic reason that the dominant capitalist economy has simply ceased to be a reliable presence in people’s lives. If capitalism fails, alternatives will happen, that is an absolute guarantee. The question that remains is what will be the relationship of the economic alternatives to the popular assemblies that also spring up. As a theory, libertarian municipalism, the political dimension of social ecology, is strong on how political power can be reclaimed from the state, but less so about how it can be wrested from capital. There is little doubt that representative democracy has failed. It has exposed itself as simply a component in the economic and political oligarchy that rules Western societies. But to take on that oligarchy requires an assembly democracy to, for example, provide public oversight of and control over a new public system of credit and banking. And even if it is agreed that that state is the crux of the oligarchy, the issue remains that millions of people are dependent on state public services and benefits. To merely leave them to the wolves in an existential rejection of the state and all its works, is not an option. A post-capitalist movement must be defensive as well as creative.

Despite the proliferation of sages, no-one really knows what will happen to capitalism in the wealthy countries in the coming decades. The only certainty is that we are in a period of uncertainty. “The validity of a theory and a movement will depend profoundly on how clearly it can see what lies just ahead,” Bookchin said in 2002.  Yet what lies just ahead is far from clear. It is quite possible that a new and overwhelming financial crisis will occur, leaving the state unable to bail out financial institutions and other corporations and thus precipitating a wave of bankruptcies and a destruction of capital value comparable to the Great Depression of the 1930s. This will leave some form of state capitalism as the only possible option and create millions more ‘superfluous’ people – superfluous in capitalist terms. Capitalism is no longer capable of playing the role assigned to it by social ecology in the past: that of well-tuned, efficient machine that spews out endless change in all directions, from compound growth to urbanisation, from work to climate change, from ethics to popular culture, while itself remaining free of volatility and disequilibrium. The machine itself is now malfunctioning. This changes everything.