The Failure of Capitalism

The world economy is in crisis for the second time in just over a decade – and has no answer to rising poverty and unemployment. How will it cope with the impending mega-crisis of climate change?

By Bryn Glover

It may be ‘bad form’ and morally wrong to kick a person (or a philosophy or an idea) when they are down but, in the case of capitalism, I am happy to make an exception.

Capitalism has been with us in many forms for many centuries – think of the traders of the ancient world and the medieval Hanseatic league – but we can think of its modern manifestation in this country as beginning with the Enclosure Acts, when the status of the more-or-less self-sufficient rural serfs and villeins was, in effect, changed to that of industrial corporate commodities who traded their repetitive factory labour for the necessities of life.

Capitalism has always operated on the basis of regular expansion and subsequent contraction. Everyone dashes to exploit some new opportunity: the weakest are trampled underfoot while the strongest mop up the remnants and prosper, and go on to seek new opportunities. Risks have always been seen as cost/benefit analyses. This cycle was clearly recognised even by those who participated in it, to the extent that they sought natural external explanations for the phenomenon. For some years after sunspots were discovered and analysed, their eleven-year regular cycle, which seemed to coincide with the capitalist ‘boom-bust’ cycle, were blamed for the ups and downs – for the successes and failures. Such were, and are, the basic traditional rules of capitalism: a sort-of Darwinian survival of the fittest, and an acceptance that to fail and to lose everything was simply the risk that needed to be taken for the possibility of succeeding and of being the dog who rose to become the top.

But modern 21st-century capitalism seems to have devised for itself a new set of supplementary rules that come into force when the old rules become too onerous. So far this century, capitalism has faced two major crises, and is bracing itself for the impending mega-crisis of climate change. During the first crisis – the one caused by the banking, sub-prime misselling crime – a new phrase entered the language, that of ‘too big to fail’. The old rules should have determined that all the banks which found themselves in difficulties should be left to sink or swim, to weather the storm or to go to the wall; indeed, in Iceland, this is precisely what happened. But in the rest of the Western world, vast sums of public money were poured into the banking system, mostly by processes that can only be described as ‘nationalisation’. It has been estimated that the overall total cost to the UK economy to bail out the banks over the last decade has amounted to significantly more than £1 trillion. It was the perceived need to retrieve this loss from public funds that led to the decade of austerity in which those least able to afford it were those most significantly hit. The reason why our NHS was so ill-equipped at the start of the covid crisis, the second of the two crises mentioned above, was as a direct consequence of a decade of austerity that starved it of essential funding and drove away thousands of staff by George Osborne’s pay freezes.

The sub-prime crisis came upon us with more than a year of warning signs, and although the actual individual events made headline news, the nature of the problem was not unexpected. By contrast, the covid event hit us all with very little warning, and most people were unaware of the possible consequences until after we were all in the thick of things. It very quickly became clear that for most of normal everyday commerce, ‘business-as-usual’ was simply not possible, and our UK chancellor brought in a series of measures that amounted, frankly, to a kind of mass-nationalisation. Millions of employed people were offered salaries and wages paid by the state, and it was the state that permitted them to receive their incomes without actually working for them. It is difficult to conceive of how a left-wing government might have acted differently, at least in the immediate short-term – how Rishi Sunak proposes to retrieve matters in the long-term is another matter entirely, and what happens when the furlough scheme ends in March remains to be seen.

Take a short step back away from the crisis and observe what is happening logically and objectively. Capitalism as we know it has encountered a massive problem and the bulk of capitalism has no answer for how to deal with it – other than by its usual rules of bankruptcy and collapse. In order to save the nation, the Tory chancellor has needed to impose an essentially socialist answer: he has declared that no job shall be in danger and that society will support everyone who needs support. (I recognise that there are thousands of people who still do not qualify under his schemes, but it is the principle that is being considered here.)

It is the gig-economy that has demonstrated capitalism’s fragility most acutely. It is estimated that five million people constitute this bloc, with part-timers, zero-hours contractors, and employees classified notionally as self-employed, very few of whom have received any assistance whatever. The privately-owned nursing homes that dominate that care sector also serve to demonstrate the point. There is no suggestion in this article that such institutions ought not to have had immediate access to the same personal protective equipment (PPE) and other highly specialised necessities that were, albeit pathetically and belatedly, made available to the NHS, but the whines and complaints from their owners make interesting study. Let us not forget that before the coronavirus outbreak these owners (ranging from small family businesses to what can only be called mega-corporations) were perfectly happy to trot along making their profits out of providing social and health care. So one might assert that when the virus struck, it was their commercial responsibility (and not the state’s) to source and provide whatever they needed for their private businesses, or to face the capitalist consequences of failure. Of course that could not happen, and of course, for the sake of their patients –sorry, clients –the state had to step in sharpish to ensure that their needs were met. Boris Johnson has said that a radical review of how such care is to be provided in the future is long overdue. Here’s the simplest solution: bring all such care homes fully under the aegis of the NHS, pay their staff and managers at NHS rates, and allow the NHS fully to assume responsibility for all their patients, then step back and listen to the howls of indignation from their millionaire owners and shareholders! The principle that it is improper to make profits out of any form of health care (including dentistry) and social care is simple and, for me at least, politically and morally incontestable.

From a capitalist’s point of view, it may be a reasonable argument to assert that the covid crisis is so serious, so acute and so enormous that no sensible person would expect normal capitalism to be able to cope, and that extraordinary measures would be unavoidable –that is, a resort to temporary socialism. But if that argument is accepted, then the clear question arising would be the same as that which occurs in any situation where the ends of the spectrum are clear, but the grey area in the middle is undefined. If the covid crisis, like the sub-prime crisis, is too big for normal capitalism rules, exactly what size of communal crisis would it be reasonable to expect capitalism to take in its stride? The answer is very simple; capitalism deals with crises according to its traditional rules, and if small businesses cannot cope with market forces, then so much the worse for them. The system is permanently on a knife edge, and is inherently so fragile that it is perpetually and intrinsically incapable of dealing with any challenge which it faces collectively, rather than individually. What possible hope can there be, even amongst its most rabid adherents, that capitalism could conceivablywithstand the collective shocks to which it will be subjected once the full force of the climate crisis hits it broadside?

As for how Sunak may recoup his hundreds of billions spent on the furlough and other schemes, the obvious choice for a Tory would be the re-introduction of austerity. The problem here is that his boss Johnson has asserted on a number of occasions that a return to the ‘a-word’, as he puts it, would be unthinkable. Doubtless, though, they are even now planning along these lines, and are concocting schemes to introduce some sort of austerity 2.0, under a nice cuddly title coined by Dominic Cummings. The poor and disadvantaged will continue to be their prime targets, but this need not be the case, and in the spirit of helpfulness, I would like to offer a practical suggestion. In this country we boast (through the ‘rich lists’ of various newspapers) of having just about one million millionaires, most of whom are many times multi-millionaires, as well as having a significant number of billionaires and multi-billionaires, such as vacuum cleaner salesman James Dyson (worth £16.2 billion). It is a bad principle to attempt to finance current expenditure from capital assets, but if this is not a proverbial ‘rainy day’ then I do not know what would be. Let us be generous and say that all of the million millionaires should be permitted to keep the vast majority of their stashes (ignoring the propriety or validity of how they acquired them in the first place) and just say that for every full ten millions they owned, Rishi Sunak’s treasury should request one million as a one-off contribution to the covid-crisis survival plan – a sort of modern-day version of the medieval tithe system. If every millionaire contributed just one million, then not only would virtually none of them even notice the difference but the Treasury would be a whole trillion better off. For example, a certain well-known chef-cum-restaurateur, having lost all his businesses last year, is still reckoned to have around 120 millions to his name. Would he really notice the difference if he only had 108 millions? The big advantage of my scheme is that, in contrast to former crises, it would be that those most able to bear the costs should do so. The Icelandic policy, a decade ago, of allowing the banks to fail certainly caused a lot of misery and distress, but it was misery amongst the bankers and their investors rather than amongst that nation’s poorest and most vulnerable.

Bryn Glover is a member of the AGS national committee

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