TLI Signature Lecture: How Will Capitalism End?



good afternoon everyone ladies and gentlemen students it's our great pleasure to welcome you this afternoon to our signature lecture in the post brexit signature lecture series here at King's College hosted by the transnational Law Institute we have a very special guest today at a very special day and many of us would have wished that the day would be special for other reasons but it presents us with challenges and so it's worthy to spend some time on reflecting on how to address those very quick word so that I don't take up too much time about our speaker today professor Wolfgang Drake has long served as the director at the Max Planck Institute for the Study of societies that is a place that I can only encourage you to visit digitally or physically as you wish because you can find an incredible wealth of resources there so that's not typical for Germany that you can go to an Institute and you can visit it from the desk at your home and you can find a wealth of research papers and publications extremely accessible and also reflective of the work that Professor streaked has been directing so he has been for me and for many others and inspiration for a very long time and his work on political economy on comparative political economy on the role of history of integrating our in the state of integrating markets and States and shaping our understanding of those has been very influential over the last few decades and two books have been in the discussion now for a while one is the book buying time that came out in Germany in 2013 and then the English version a year later in 2014 and now just a few weeks ago a book with the promising intriguing title how will capitalism end not when but how so we're very grateful professor strike that you generously give us your time and the floor is all yours we agreed that we'll that you'll speak for about 40 minutes then we have Q and a and then we should break around 5:30 because then you will served a glass of wine which is interesting and you also have the chance to buy his book for ten pounds yeah which I just learned and you then have to come back if you want to for a seminar right that's really even after after the world yes after the wine you get the glass maybe get your books I'd come back and then we do a seminar where you can actually talk about the book in more detail between six and seven after which we will steal him and take him away and then you can still have another half-hour so and finish the wine that's the plan that's very well organized it is absolutely and yeah thank you very much this is a special day as Pierre said and I will not repeat what I said on the book yesterday and I will devote a little more time to the particular event that we were all thinking about and and how it fits into the picture that I draw in the book yeah it's a marathon the end of of capitalism in the book I'm saying roughly that modern capitalism is a historical phenomenon it begins somewhere in the late 18th century and if it has a beginning then it is clear that it also has an end the question is when and how one of the main points in the book is that in order to imagine the end of a social formation it is not necessary to already know about its successor something can end but it is not replaced with something else and not necessarily with something better so what what you want to do in order to think about the temporality and the historicity of capitalism is take leave of what I call the Central Committee view of the end of a society that you consisting of the image of vladimir Ilyich Lenin pronouncing to the world that capitalism is over and socialism has begun or for our the only society that could be ended this way was indeed communism when secretary had seen appeared before the press and declared communism to be ended and from tomorrow on capitalism under the guidance of Jeffrey Sachs that could be done because socialism or communism was sufficiently centralized for this not so with capitalism in other words when we talk about the end of capitalism it is enough if we can identify a syndrome of crises in the social order of capitalism that with all by all probability is such that it cannot be easily be cured or remedied the main idea of the book is summarized as a simple dialectic and that dialectic consists of three sentences one or three claims one capitalism cannot exist without being governed that is outside of a social order capitalism as such is impossible it destroys itself secondly which makes for the dialectic in the course of its expansion and its historical development capitalism in particular neoliberal capitalism has undermined its own governability and more than ever recently under neoliberal globalization from this follows unless the governor ability of capitalism can be restored and it is hard to see how that could happen capitalism will be in a terminal crisis strong claim but you need to make strong claims in order for things to be interesting if you just say it's in bad shape and so on no we are we're thinking about the historicity of the thing and if we take leave of the the Bolshevist fallacy about the end of a social formation then it is also then it is possible and should be possible to think about a long period of transition of this orientation of social disintegration great uncertainty as Mervyn King the former governor of the Bank of England calls it in which traditional predictions no longer work because established causal chains are broken or suppressed in which social transformations happen that however do not yet result in a recognizable new pattern new order in other words a period of transition interregnum as Antonio Gramsci has called it and he defines an interregnum as a period in which the old society is dying but the new society cannot yet be born and in this in this passage in the prison notebooks then follows the sentence and this is a time where the most bizarre things can happen last night we may have had a foretaste and off of the kind of bizarre things that are possible but they're more than that for example the the permanent possibility of some bubble building up and blowing up the the changes in the social structure of our societies as a result of the changing political economy of capitalism under the impact of globalization and similar similar forces now before I Allah straight this using the events of last night I want to give you a brief discussion of of the definition of capitalism what I mean when I use the term sorry I will not go into into the long into a long debate on the different definitions of capitalism that we find in the literature that would be unending but I think a consensual description explication of the pattern of society that we look at is the following first of all capitalism is a modern society the the that is not trivial Adam Smith doesn't use the word modern in its place he speaks of progressive society both meaning that this is a society that places its its existence its raison d'être on permanent on dynamic permanent improvement continuous change to the better it is not a traditional society that considers itself aesthetic and as a sort of natural as the the expression of the natural underlying order that cannot be changed in in Europe at least but I think in all other parts of the world as well this was the dominant view of the social order until the 18th century the time of enlightenment yeah before that there was a fixed order and it is also visible this is also visible in the famous statistics that Angus Madison composed on the per capita income in what is now the Western European part of the world these statistics begin in the year I think 2500 BC when he calculates the per capita income of Egyptian of people people in Egypt I don't know where he finds the data but the interesting image is this dynamic period that Adam Smith describes as a progressive society that I call a society built on pro-social growth on growth and progress and that a society that is not static but dynamic now this is not the whole definition now we add a very important additional property that this society is a capitalist society in the sense that it has coupled its progress to the continuous successful accumulation of privately owned capital as a condition of this kind of development that I described if private capital accumulation is not functioning then the progressive of this society comes to an end it collapses or with the maxium perspective it has to be replaced with a different kind of capital accumulation this time not in private hands but in the hands of this society as a whole that would be the succession to socialism or capitalism as envisaged in the 19th century for Marx it was simple you have to decouple the the progress of capital accumulation from the notion of privately owned capital and then you're over the threshold the coupling of the progress of society to private accumulation is the the Achilles heel of this social structure and and the problem that is associated with this which we see obviously minority-majority and so on is healed by in Adam Smith with a mechanism that turns private greed into a public blessing we're private greed produces public benefits and this happens in Smith through markets or in in the Montville early 18th century the vices of the rich are the benefits of the poor because the rich buy all the stuff and thereby increase so so this is the coupling mechanism that makes sure that private capital accumulation actually is progressive later the liberal Smith Ian solution to the problem was complemented but not replaced by the saucepan by an additional social democratic solution which is that it is not only competitive markets that should make for the improvement of of prosperity or of public well-being but also democratic political intervention yeah so then we get these two mechanisms of coupling which often get into conflict with each other this is basically the Social Democratic era of of state governed or state administered capitalism now the problem of course is in this thing to secure the cooperation of the non owners of capital when the game is about making the few owners ever richer very complicated devices you need for this in the beginning of capitalist as Marx describes in chapter 24 of Volume one I can only recommend this don't be deterred by chapters 1 2 3 they are completely unreadable but from then on it gets really exciting and chapter 24 I think it's the most exciting on primitive accumulation where he describes how the start of capital is based on brute force and then in order to get this cooperation going and and then you need all sorts of other means up to let's say the fear of being fired or benefits packages or whatever think about whatever you want how do you motivate the 90% to to work for the 10% that's the crucial problem but I will not go into this in in in great detail now maybe finally by way of introduction that is we're already in the middle but that's by way of ending the first part capitalism as a liberal or libertarian utopia is impossible for a number of reasons which I will briefly touch on it needs to be be it being governed is indispensable the first instance where this is analyzed with great precision is chapter 14 of the of the volume that I just mentioned volume 1 where he describes the working day the the the politics of the working day and he describes how in the men chest in the in the factories of Manchester workers and their children were dying from overwork and employers we're beginning to think about the problem of how can you extract surplus value from a workforce that doesn't exist anymore because they've all died in the process of having their surplus value extracted from them the answer would be to give them at least some time to recover that is limit the length of the working-day but in order to do this you have to convince your competitors to do the same and there is a problem of a gap between individual rationality and the rationality of the system as a whole and that can only be closed by politics in fact Marx shows that for this closure to happen you need adversarial politics namely trade unions who go and strike for this and and the trade unions have the same problem their workers also work themselves to death as long as they are under competition because they have to be afraid that they will be fired if they if they go home earlier so what Marx says here is that you need law or a binding rule that makes it possible for the members of both classes to behave in line with what should be their their rational interest but cannot be in practice as long as they cannot act collectively yeah and and so this is the first or historic example of the need for capitalism being governed in order to be sustainable yeah I I move do you through a few other examples and then we go to the precise application to today's world one crucial mechanism of stabilization of capitalism redistribution markets in order to in order to make a profit on the products that you produce someone must buy them without customers no way but people can buy what they produce only if they have sufficient income for the purpose now markets work according to the principle of a short end is Matthew twenty five twenty nine he who has will be given and he who doesn't have anything will be taken away even that which he is yeah you can also call this cumulative advantage this is how markets operate now in order for this not resulting in permanent increase in inequality and all the purchasing power sort of assembled in the hands of few families who put it in a bank and then the bank's sort of shifted from one bank to the other and subtract their fees from it get very rich but nothing else happens in order to for this to in order to prevent this you have to have some mechanism of extracting out of the teeth of the rich some sort of purchasing power for the poor this was the ideal solution that Keynes invented in the 1930s to overcome the secular stagnation of capitalism at the time trade unions plus social policy in in the in the 1950s 1960s the idea was that capitalist economies grow if you take from the rich and give to the poor because the poor spent the money they have to spend it they don't save it only the rich save it take it out of circulation as a result of which the the economy grows less than it could and you have a lot of unemployed yeah so so the claim that Keynesian mechanism of redistribution was uniquely compatible to mature majoritarian democracy the egalitarian impact of democracy or bias egalitarian bias of political democracy so became an economically functional element of a modern capitalist society coupled couple of private capital accumulation to the to the spread of to to the increase of social well-being more more examples could be given Social Security the transformation of insecure workers into confident consumers collective infrastructures reliable money stable periphery around the core of capitalist countries where capitalists can invent invest and hope that the investment will not be expropriated by local radicals for this purpose you need company law Pierre is in charge of this you you also you also need in addition to to economic law you need a lot of military to to make sure that the unwashed do not interfere with subtleties of capitalism and the market now I I will stop this sort of exposition here we can go into more details in the discussion I the most important point is the structure of governance and the existence of effective counter weights to the in egalitarian bias of a capitalist economy is essential for the capitalist economy to function if this is absent all sorts of things can happen now going to the new era what we now might call the post neoliberal era in which we live we can directly apply this and bring it in in contact with the phenomenon of economic and social globalization as we know it and as we have known it since roughly the late 1970s and now it is possible reasonable to suggest that last night we may have seen the beginning the the beginning of the end of globalization as we know it yeah we have seen a revolt inside the leading capitalist economy against the central dogmas of neoliberalism as applied especially in the United States in the past three or four decades in this sense what we've seen last night is very similar to what we've seen in the brexit vote to what we've seen in the resistance to TTIP to what we are seeing in France in the in the rise of a very ugly version of of nationalism if you put all of these phenomena together you can analytically see that there is something to do with the following problem states that open their borders without preparing their populations for the impact of globalization in fact states which open their borders while destroying internal social protections in the name of international competitiveness cause a development during which more and more of the citizens sort of sink down from the in America it's called the middle class into a growing number of people who become superfluous in the economy who are excluded from the mainstream of the internationalized economy who cannot compete the the neoliberal answer to this is go to school learn something work for less then you'll find something but you unfortunately you're only a construction worker if you were a professor in Harvard you would have tenure but but that is something that is not really convincing to those that are affected so we have seen we've seen here a problem which even economists are now recognizing that there is a problem with the dogma of free trade the problem is that while you can show that countries benefit from free trade if you take countries as a whole that does not mean that all their citizens will benefit it may be that only some of the citizens benefit and others don't in fact if you disable traditional mechanisms of redistribution as you do in the neoliberal revolution the result is that the the benefits that are appropriated by one part of the population are not shared with the other part that is not privileged and so they sink down this is a gradual process but it is a continuous process so at some stage you reach a threshold when these people below the limit of what you could call system Inclusion become more and more at this point you can imagine that something like a revolt of a new underclass may begin not necessarily a sort of aesthetically beautiful revolt because this is not how evolves work more like Hobbs bombs primitive rebels perhaps where all sorts of surprising lapses in civilized language civilized behavior of what we consider civilized language may may happen the domestic politics of globalization and is so consists in the call for neoliberal structural reforms but these reforms cannot be made by everyone and in the same way so divisions of the policies emerge which are covered up by what we call the tea tea tea I and a politics tina there is no alternative Margaret Thatcher's favorite female assistants assistant Tina and and this for a while this covers the the problem up but it cannot do so forever the disablement of social protection in the name of competitiveness the results in growing segments of the population suffering social dissent and at this moment for a long time these people who were dropping out of the economy were also dropping out of the polity what we see since the 1970s in all of our countries is a declining participation in political elections and an erosion of party membership disappearance of trade unions basically for all practical purposes trade unions the desolations being the second channel of of correcting income distribution in addition to politics all of these pillars of the post-war Democratic regime sort of disappear because the disproportionate number of people in the increasing underclass are beginning to take no interest anymore in politics because they don't expect anything from politics which is quite reasonable because if they look at the centrist parties then they will see that they have basically the same programs the program is open up to the world become competitive look after yourself take take classes in in in community colleges or wherever so that you can get a job unfortunately we can't do much about it they are also this is one thing they drop out of politics and and this increases the illusion of the middle class that they are basically alone that they are no there is no discontent because it is not articulated in the official channels the channels are stuffed they are closed then you see all the strangest anticipating anticipating Gramsci you see very strange phenomena like the silencing of the underclass by cultural intimidation basically they are being presented as right-wing rednecks and unwilling to be flexible rigid too old anyway so also a lot of sort of entertainment what I call entertainment by pseudo politics in the United States LGBT who is allowed to marry whom the one of the last political acts of Obama was to make it obligatory for each high school to have at least one transgender toilet yeah in a society in which for years inequality was exploding going through the sky and in which economic growth was was minimal for those in the center of the society in the middle of the country if there was growth at all so increasingly then you find and this is also description not just of the United States yes very good the class divided being increasingly reflected as an urban rural divided big city versus small towns versus countryside the result of this is that both the the benefactor the the benefactor ease or those that benefit from from globalization and those that are not benefiting from it live in isolated communities in if you live in New York it's New York City it's very hard to argue that globalization is not a good thing even if you're a waiter in a restaurant all these bankers from everywhere who come and and and have lunch in your place and then leave a tip 20% in the city of New York so that silences your your discontent easily although although you cannot live in that city anymore you live in Brooklyn or even even further away and you have a sort of 1 and 1/2 1 1 an hour an hour and a half right to work every day in the morning and in the evening yeah you seem to know a New York City very well I I do too and I can say it's even worse than you can describe and a few in in a few sentences so the class divided is sort of spatially reflected the the hope of the sort of liberal establishment is that concentrated in these backward areas people who simply resign resign they they just nothing so now we see something interesting a very strange way of a return of the underclass to democracy through populist parties these are new parties the the Republican Party that is represented by mr. Trump is not really the Republican Party the repelling very different this is a new party in the same way in which Bernie Sanders's organization was also the new party there nothing to do with mrs. Clinton who who left the White House in in the year 2000 with a debt of of I think five million dollars debt for the family now she seems to own roughly two hundred fifty million dollars that's a pretty good income over sixteen years we all would want to share them within it but she won't allow us the the kind of lectures that I give you he doesn't pay me anything but but if if if Hillary goes to to Goldman Sachs she she'll be paid three hundred twenty thousand dollars a lecture and and I wonder how much is that that what she can say in the lecture is worth three hundred twenty thousand dollars she must be very very very smart so so for Bernie Sanders and his people this party run by the Clinton organization is something totally exotic it's totally different and and of course the only thing that she had really to offer was we're breaking through the glass ceiling and we will have the first woman as president if you also be proud of it that apparently was not enough to to pacify the growing number of people who are excluded from the benefits of globalization so now this is a movement that you see not just in the United States it's a very unpleasant thing for established parties these people are returning to politics we since five years we are see we're seeing again an increase in electoral turnout but it benefits only these new parties which are in fact often parties that are unwilling to govern from Trump is obviously an an exception unwilling to govern because they know that in the logic of technocracy they have very little to offer for the time being what they offer is protest right now in the United States to my surprise yesterday night I still believe that that she would clench it you know the more the moment comes much faster what does this mean what does this mean and what does it mean for the governor ability of of capitalism that's a long story and and and and I am entirely unable to make any predictions on what will happen but I am now taking more seriously than before what this man has pronounced at different stages of his campaign hardly ever reported about because all they all that they reported on was you know what the the politics today sexed up in a way that is simply a would twenty years ago or even went completely unbelievable so what Trump seems to have in mind is something that Paul Krugman would very much like like to on the right which is an end to austerity yeah it's very interesting at the same time he also somehow follows Krugman Krugman's earlier work on on free trade in that he seems to advocate something like managed free trade or even trade barriers especially with respect to the United to to China and Mexico that same thing is to come together with a raise in minimum wage with a higher minimum wage well that is that he owes to his constituency and a cut in taxes which is what every American president does in in order to get reelected because he needs to wait to be funded his campaign needs to be funded by the rich even his campaign it doesn't even it doesn't seem to have that much money as he always claims he does which is an interesting thing in itself he certainly doesn't belong to the to the underclass that's for sure so so it's an anti liberal platform with a very liberal element which is the tax cut which in the United States is always a tax cut for those at the upper end then he has he has an idea that he takes from the New Deal which is increased spending on infrastructure and maybe even less on defense but that's not that's not quite clear spending on infrastructure means the fiscal attempt at refighting the American economy that is bound to result in more debt the usual thing because if you cut taxes and then you increase spending the only result could be that's a question where he doesn't have an answer in my work in the book you can read something about the transformation of the historical debt state of the historical text state into the dead state today in the consolidation stay in in this schema the conceptual schema of my concept of the consolidation state I think much of what what he will do can be at least analyzed yeah and and now comes the final point that he seems to have made several times in the campaign but nobody seems to have really listened which is that he seems to have read this rediscovered Milton Friedman's idea of helicopter money what is helicopter money well he has to he has to yeah he has to convince the the Fed to to to help him in this the the Federal Reserve Bank but essentially the idea is Milton Friedman he says no or there may be situations where a monetary policy doesn't help where fiscal policy is blocked but don't worry we know what to do we take a couple helicopters and then we put banknotes in the helicopter and the helicopter start and we throw the money out of the window down there are the citizens who will probably some of them will kill each other over the money that comes down on them others will grab the money then they go shopping as a result of which everything will be good again so that's that's Friedman then he seems to take this seriously now in order in in the New World you won't slow the money from the helicopter what you will do is you will send citizens a check if they pay taxes which leaves out those that are not paying taxes you have to find a way of sending them a cheque to the economists are seriously debating the problem whether this will help because they assume that people who are in debt up to the ears will grab the money well on what way it will ever come and then pay off the debt that will not start the economy that's a possibility so one final thing on this basically the money printing is already going on in the form of the so-called quantitative easing in all of our major countries except that it doesn't go to the consumer it goes to the banks and from the banks to those that own the banks but in any case the increase in the in the money volume is something that has has been going on without any effect the zero interest rate policy had no effect at all he seems to think we need a populist version of this which is to give the money to everyone and maybe does it early late enough for before the next election and before the interim before the two year in Congress congressional election and then here we find I finish here just to say that you recognize in this account the all the problems of governability of capitalism at the national level as well as the international level trade trade agreements protectionism and so on the Democratic counter pressure and the the difficulties of accommodating that pressure and the political vagaries and and sometimes beezly's of how politics responds to these pressures it doesn't look very promising quite to the contrary but it will certainly be interesting to watch




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