Monday, October 20, 2008

the collapse of capitalism*

A few weeks ago Samuel Brittan wrote

What does the great credit crunch do to the case for competitive capitalism? It is surprising that this question is not more often asked.
I donno, I've heard triumphant told you soing. People have compared it to the collapse of communism 20 years ago and suggested that this is what Marx predicted all along. Back in the 1950's some famous intellectuals, disillusioned by the horrors of Stalinism, wrote essays in a volume entitled The God that Failed; an op-ed in the Washington post asks if prominent capitalists do something similar? (annoyingly he talks about the death of unregulated capitalism. I'm not a libertarian that denies anything bad would have happened if only governments had left well enough alone, but describing the financial markets as unregulated is crazy)

Since even in the best of times lots of people are explaining how capitalism has failed, maybe it's difficult to separate out people whose belief in capitalism was shaken specifically by the current crisis which is maybe closer to what Brittan means. I've been surprised by articles questioning capitalism by writers who I know as defenders of capitalism. They typically conclude that it isn't the end of capitalism, but still, that's more alarming than regular old doomsaying.

I haven’t read enough about the current crisis to count as well informed; I’m put off by titles like The Crisis Explained, I know I can’t evaluate the merits of various bailouts and I’ve been intimidated by how much stuff there is out there. Also, I’m just not that interested in the details. Having said all this I don’t think it’s clear that there’s much agreement on what the collapse (or failure) of capitalism would look like. I mean some criteria that would have seemed reasonable a year ago.

Does collapse require that living standards fall to more or what they were when capitalism “started”? Should capitalist states descend into violence? How about the standard of living of a large chunk of the population dropping by 30% and not recovering?

I’m not kidding. Communism’s failings involved slaughter and starvation on an epic scale. Even when people weren’t actively being killed, many were willing to risk being shot in an attempt to escape to the West.

Waterboarding may count as torture but it’s not the same as having your fingernails ripped out. Using the same word to describe different situations is apt to gloss over subtleties distinguishing them.

Even if everybody in America lost half their wealth they’d be about as rich as they were in the 80’s, which, fashion aside, isn’t remembered as a hellish nightmare.

Another thing that I don’t get is that capitalism has always been subject to boom and bust. I doubt any free market loving economists claimed that there’s never be another crash or another recession, even a bad one. So if we all expect crashes etc in the future why do people get so freaked out when something bad actually happens? This crisis may be different to previous ones, but so were all the other ones different! It may be worse than most but how bad does it need to be to invalidate the general trend of growth even taking things like the Great Depression into account?
* The post heading is the link to the Economist cartoon.

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