The early years of the twenty-first century have not been good for global capitalism. An international credit crisis and a widespread recession since 2008, with all their attendant anxieties and miseries, have unsurprisingly shaken public support for free-market processes – especially within many of capitalism’s traditional strongholds. In addition, with the recent Covid-19 pandemic-induced supply chain disruption and economic aftershocks, Ukraine’s first war in Europe in decades and its resulting serious energy crisis, the globalized economies of the world are facing a combination of domestic recessions questioning their welfare models, leading to rising interest rates, high inflation drifting poor and rich further apart, deepening negative climate effects and serious geopolitical uncertainty.
“Rarely do so many volatile business conditions descend at once on the world” and “Unless systemic risks are addressed, the promise of a ‘decade of action’ may become a decade of uncertainty and fragility,” warn the organizers of this year’s World Economic Forum meet at Davos from January 16 to 20, 2023 with the theme ‘Cooperation in a Fragmented World.’ But what are the ‘systemic risks’?
Many mainstream and socialist economists have an understanding that a capitalist market economy is not an automatically self-regulating system; rather, it periodically enters periods of self-generated breakdown or ‘systemic risks’. More than 150 years back, none other than Karl Marx called these periods of risk as “crises”; today, we use a gentler term, “recessions.” It looks like Marxism, which never went away, is back. Capitalism, which was for a time seen as being akin to a law of nature, something permanent and unchangeable, is now being discussed and critiqued even by its champions.
None other than billionaire Ray Dalio, the founder of the largest Hedgefonds, and author of the bestseller ‘Principles for Success’ meant for investment bankers comes to a strong conclusion that capitalism must be fundamentally reformed if it would like to survive further because richness and prosperity are distributed unequally and there is no room for ensuing equal opportunities for all. The ‘Financial Times,’ an international mouthpiece of financial markets, says it is high time that neoliberalism exits from the world stage and makes room for the state. International corporations starting from Bosch to Goldman Sachs strongly discuss today the immediate necessity of keeping the societal interests above those of the private shareholders.
It is widely believed in international schools of thought that mainly three important factors have led to a renewed interest in left alternatives to neoliberal capitalism and to which Marx is “clearly relevant to.” These are the persistence and currently deepening of the 2008 financial crisis until today, with the strong warning that chronic instability still underpins capitalism; the astonishing growth in serious economic and social inequality and concentration of wealth in few property owning classes in the last decades, and warnings about the prospects of mass unemployment currently emerging as automation proceeds towards platform capitalism. The importance of crisis theory.
It looks like Marxism, which never went away, is back. Actually, Karl Marx lived in the 19th century, an era very different from our own, if also one in which many of the features of today’s society were beginning to take shape. Coming back to ‘systemic risks,’ the deeper understanding of the drive towards crisis is central to Marx’s analysis of capitalism and to his arguments for the possibility and necessity of revolutionary change. For Marx, the existence of inequality or poverty alone is not what turns workers against the capitalist system. These problems have always been a part of the everyday workings of any “healthy” capitalist economy. Of greater social and ideological impact is the insecurity, instability, and ruin that economic crises periodically inflict on the lives of the working-class and all toiling people.
Marx presents his crisis theory in its most developed form as ‘Law of Tendency for the Rate of Profit to Fall’ which is considered in every respect the most important law of modern political economy. A key characteristic of these theoretical factors is that none of them are natural or accidental in origin but instead arise from systemic elements of capitalism as a mode of production and basic social order. In Marx’s words, “The real barrier of capitalist production is capital itself.” Already in the second-half of nineteenth century, Marx took note of “a new financial aristocracy, a new variety of parasites in the shape of promoters, speculators and simply nominal directors; a whole system of swindling and cheating by means of corporation promotion, stock issuance and stock speculation.” This, he observed, was closely linked with enhanced role of credit both as accelerator of growth and, when stretched beyond a limit, as harbinger of crisis.
This is explained by him very interestingly from his time as a business and financial correspondent for the New York Tribune in the 1850s, then the world’s largest newspaper. In discussing the crisis of 1857, generally regarded as the first worldwide recession, Marx focused on the policies of Crédit Mobilier, the world’s first investment bank. He noted that the bank’s statutes allowed it to borrow up to 10 times its capital. It then used the funds to purchase shares or fund IPOs (Initial Public Offering) of French railroad and industrial corporations, greatly increasing output. But when no purchasers were found for the expanded production, the bank discovered that the stocks it had bought had fallen in value, making it difficult to repay its loans. Now, just replace Crédit Mobilier with Lehman Brothers or the Anglo-Irish Bank of 2008-2009, and French railroad and industrial firms with Nevada or Irish real estate, and we have a fair picture of a major cause of the last financial crisis before us. This is absolutely in conformity with Marx’s crisis theory and the main concern here is that we seem to be, indeed, heading deeper into this crisis currently!
Since the turn of 21st century, the rise of information monopolies has created a ‘platform capitalism,’ yet another method of making money out of money bypassing the hassles of production and the rapid spread of internet connectivity. These online or digital platforms do not own productive facilities or inventories (Uber for example owns no vehicles; Facebook creates no content; Alibaba and Amazon have no inventories) but provide the vital “interface” between sellers and buyers/users, in the process stealing, assembling, using and misusing huge quantities of our data. For instance, the “Big Five” – Facebook, Apple, Amazon, Microsoft, Google – represent more than 20% of the market and companies like Uber, Lyft, Airbnb, and Paypal are all worth tens of billions of dollars and increasingly dominate our economies and wield tremendous influence over our culture, social interactions, and political systems.
However, again here the same phenomenon of recession Karl Marx noted in 1857 is slowly emerging. For example, as the bulk of Elon Musk’s wealth is tied up in electric vehicles Tesla (TSLA), whose stock plunged 65% in 2022 as demand weakened, he lost a record $200 billion. Amazon’s founder Jeff Bezos says mass layoffs of 10,000 in 2022 and 2023 are inevitable due to recession. Google is expected to fire nearly 10,000 employees for poor performance, including in India. Meta (earlier known as Facebook) is firing 11,000 people, and Twitter has fired half of its workforce. Global financial institutes conclude that like US, nearly all Eurozone economies are currently in a recession. Global Risks Report 2023 presented by World Economic Forum for discussion at Davos speaks of a set of risks that the world is facing today, such as inflation, cost of-living crises, trade wars, capital outflows from emerging markets, widespread social unrest, geopolitical confrontation, and the spectre of nuclear warfare – which few of this generation’s business leaders and public policymakers have experienced. These are being amplified by comparatively new developments in the global risks landscape, including unsustainable levels of debt, a new era of low growth, low global investment and de-globalization, a decline in human development, growing pressure of climate change impacts, all converging to shape a unique, uncertain, and turbulent decade to come. Global capitalism seems to be indeed in deep crisis. Given this background, let us hope that representatives of national governments, business and civil society meeting next week at Davos will be able to design options of shared responsibilities, which are not just aimed at business as usual, but genuinely understand and address the root causes of the risks produced periodically in the systems we live in today.
Source: https://www.thehansindia.com/hans/opinion/news-analysis/would-karl-marx-be-right-after-all-777988
Ramesh Chennamaneni - Collected Works 