One of the current issues discussed in both academic circles and society in general is what the future of capitalism will be.
Debate centres around speculation as to whether this economic system can be maintained over time and a solution found to the problems of economic inequality it has generated, or whether it will be replaced by an alternative system.
Clearly, capitalism has been the economic model and the main driving force behind the process of economic globalisation we have experienced in recent decades. The following data offer an insight into just how important capitalism has been.
In 1820, world GDP totalled approximately 694,4 billion dollars, according to data presented by Angus Madison (2003), whereas today it has reached nearly 87.697 trillion dollars, according to data from the World Bank. Cees J. Hamelink (2015) notes, for example, that capitalism has spread to such an extent that in the 1990s it covered 90% of the world's population, compared with just 20% in the 1970s.
The origin of this economic system can be traced back to when modern societies were beginning to take shape, given that the industrial revolution marks its emergence as an economic and production model based on the ideas of classical liberals. They proposed the establishment of a market economy model that respected private property and the freedom of companies to produce the goods required by consumers to satisfy their material needs.
According to the defenders of classical liberalism, this capitalist model helps companies to generate profits, because the price system signals allow them to anticipate society’s material needs through their demand in the market. Therefore, liberalism considers it essential for a context of competition to exist between companies, so that monopolies can be avoided and, consequently, consumers in the market can be offered the best price and quality.
In this respect, classical liberals argued that the correct operation of the market economy model should be supported by the pursuit of personal interest, because this acts as an essential driving force for producers and consumers to make their exchanges with the aim of gaining mutual advantage: producers make a financial profit and consumers have their material needs satisfied.
Moreover, classical liberals recognised that the capitalist model generates economic growth and, as a result, wealth, and material well-being. Therefore, according to the defenders of capitalism, it represents the best economic model for guaranteeing this economic growth and improving the material living standards of the members of a society.
However, humanity has had to face the so-called systemic crises of capitalism. We have seen that the capitalist system leads inevitably to cycles of permanent instability, since it is capable of creating its own crises (Minsky, 1982). Two clear examples of this have been the so-called "Great Depression" of 1929 and the financial crisis of 2008.
Humanity has had to face systemic crises of capitalism
In this last crisis, the detonator was the easy access that the US government and its citizens had to large sums of money from overseas at minimal interest rates. This led to the generation of debt which, in the long term, proved unsustainable. In fact, the decrease in interest rates and the dismantling of financial regulation reinforced the idea that everyone could own their own house or apartment.
Nevertheless, the public revelation that the mortgage securities which had been offered in the financial markets originated from a fragile, high-risk underlying asset led to difficulties in the continued payment of mortgages. This situation triggered a financial panic that resulted in a global economic crisis.
Taking account of the systemic crises of capitalism, the first question that we must ask ourselves is: What has enabled capitalism to survive the systemic crises it has experienced in the past? To provide answers to this question, I will focus on three factors I consider relevant to explaining the survival of capitalism:
First, there is the State. The State has played an important role, because it promoted this economic system and it has contributed towards reducing the negative effects of its systemic crises, in which it has been a co-participant. This becomes clear if we analyse the role of the State in three specific periods of history. They are the following:
- The beginning of the industrial revolution. At that time, the State's support encouraged the bourgeoisie to engage in industrial development, whereby their wealth was increased, and capitalism was consolidated in several European countries and in the US.
- The second period is related with the State's application of Keynesian-like policies, with the aim of producing a recovery of economic activity and solving the problem of unemployment caused by the crisis of 1929.
- The third period is the decade of the 1970s. This decade was marked by high inflation, as a result of the 1973 oil crisis and the rise in oil prices in 1979. In order to find a way out of this situation, the State stopped applying Keynesian policies. Although Keynesian policies were appropriate in a context of unemployment and falling prices, as in the 1929 crisis, they were not suitable when there was inflation, which was the case in the 1970s, and less so when this inflation was accompanied by unemployment.
This explains why monetarists, including Milton Friedman, suggested that the State should confine itself to controlling the amount of money in circulation and to setting the supply of money required by the economy in general. They also proposed that the State’s role in the economy should be reduced by means of tax reductions and the privatisation of public companies. For example, during the decade of the 1990s, the vast majority of Latin American countries sold state-owned companies for more than 10% of their GDP (Chong & López de Silanes, 2005). In fact, the application of monetarist policies laid the foundations for the appearance of economic neoliberalism as the economic model of capitalism and the dominant ideology in the international economy. This economic neoliberalism advocates reducing the role of the State in the economy. This clearly marks a return to one of the fundamental ideas of classical liberalism.
However, in seeking to account for the survival of capitalism, it is of relevance to note that the State played a key role in the establishment and imposition of the mercantile system and its regulations in the national economic arena from the 17th century onwards (Polanyi, 2015). Indeed, the State took the lead in extending the sphere of influence of the market until it became a dominant institution of social organisation.
The State helped the market to carry out a process of commercialisation of social relations which has been fundamental to the evolution of capitalism (Polanyi, 2015). Clearly, this calls into question the basic precepts of classical liberalism, according to which the State should not intervene in the economic system. This is important, since the role that the State has played casts serious doubts on the idea that the market is capable of self-regulation.
Evidently, no justification of this idea can be found in the historical evolution of capitalism. But it cannot be denied that over the course of history the State has supported capitalism in its survival and in its consolidation as the dominant economic system worldwide.
Over the course of history the State has supported capitalism in its survival
The second factor I wish to highlight about the survival and consolidation of capitalism around the globe is technology, since this has accompanied capitalism from the industrial revolution through to the present day. Its contribution is clear to see when we consider that capitalism has undergone a substantial transformation as a result of the advances in electronic technology and telecommunications. This has paved the way for what Manuel Castells (1996) defines as informational capitalism, a product of the globalisation process we are immersed in.
Today, we can see that technology has brought an automation of production processes and the introduction of robotisation, leading to the replacement of workers by machines and an informatisation of the economy. Clearly, this is radically transforming the dynamics of production and the accumulation of capital worldwide since it increases the efficiency of the production system and promotes effective distribution of goods and services offered in the market.
Two reports provide evidence of this impact. According to the database of the International Federation of Robotics, which brings together more than 15 countries, there are 2.7 million industrial robots in operation. It is estimated that in the future there will be approximately 3.8 million robots and growth of 16%, which underlines the importance of robotics in production processes around the world. Furthermore, a report by the McKinsey Global Institute (2017) concludes that some 800 professions have the potential to be automated if technologies that have already been tried and tested in the world economy are adopted and introduced. These technologies can help to make operations and processes more efficient.
Bearing in mind this new trend, the fruit of technology, my question is: What are the repercussions of this technological dynamic of the production processes of neoliberal capitalism? I consider that it is creating a new socio-institutional regime that limits the role of the State and its social, credit and direct techno-economic development functions. Furthermore, it is benefiting the large-scale extension of the free circulation of capital, goods and services, a fundamental aspect of neoliberal ideology, since it defends the removal of any barrier or limitation to the free flow of the aforementioned.
This implies that it restricts the role of the State as a guarantor of the equitable distribution of wealth and the provision of social services that are essential for society.
The third factor is related with western cultural values and premises. In the sphere of production and work, an important role is played by the values of effort and discipline. These values are grounded in the Protestant ethic and the spirit of capitalism (Max Weber, 1998). This ethic posits work as a vocation that leads to economic success. This explains why importance is attached to constant and disciplined work, from a rational point of view, as a means for the individual to be more efficient, more productive and, as a result, achieve economic benefits and a greater material well-being.
On the other hand, the ideals of self-liberation, authenticity, and emotional fulfilment of the individual play an important role in the sphere of consumption (Illouz, 2019). It is assumed that the individual gives primacy to their hedonistic ethos, which legitimises the attraction of the consumer culture and, consequently, that nowadays we live in societies that attach importance to consumption. An example of this can be found in the increase in global sales of video games. Sales generated by these games rose from 1 billion dollars in 1970 to 152.1 billion in 2019, according to data published by the business and financial data companies Bloomberg and Pelham Smithers.
We are witnessing a type of individualistic and consumerist subjectivity that turns citizens into clients, whose social functionality is inextricably tied to the exacerbated pursuit of their own happiness
In this respect, this consumption becomes a central activity, because we devote considerable economic and emotional resources to it (Alonso, 2009). But at the same time, consumption is pivotal, because it creates and structures a large part of our identities and forms of relational expression (Alonso, 2009). Individuals have internalised the idea that consumption is associated not only with the satisfaction of material needs, but with complete emotional satisfaction, and that it also serves as a means to interact socially.
We are witnessing a type of individualistic and consumerist subjectivity that turns citizens into clients, whose social functionality is inextricably tied to the exacerbated pursuit of their own happiness (Cabanas, 2016). For example, all products and services, such as self-help or yoga books, are centred around the promise of fostering an authenticity and personal growth that will help the individual to find complete happiness, but in reality they generate a lifestyle that leads to high consumption. In the US and Latin America, for example, self-help books account for as much as 25% of turnover in the sector.
But in addition to this, we may observe that human experiences are being turned into raw material that becomes behaviour data; these data are converted into material that is accumulated and used to produce the good that will be offered for sale on the market: I refer here to predictions about us that are commercialised among the major digital companies such as Amazon, Apple, Facebook and Google (Zuboff, 2020).
In this respect, we can perceive a tension in which the psychological takes precedence over the social, due to the influence of the discourse on the pursuit of personal happiness and the commercialisation of our human experiences, which is replacing the importance of citizens in the neoliberal model.
However, this tension has been useful, because it legitimises the individualistic ideology of neoliberalism, presenting it in psychological rather than ideological terms. This allows its ideological implications to be hidden, since the pursuit of happiness is presented as a natural and obvious goal of every human being. Nevertheless, this pursuit leads to a constant consumption of goods and services.
Therefore, the premises and values promoted in the sphere of production and those promoted in the sphere of consumption lead us to postulate a conflict present in the characteristics of capitalism today (Adorno & Horkheimer, 1994; Habermas, 1985; Simmel, 2013). It is considered that capitalism includes some characteristics that are at conflict in the cultural structure of the modern-day consumer and, consequently, the producer.
These characteristics are, on the one hand, rationality, and on the other hand, the emotions that may be observed in the individual and in their behaviour and interaction in both the social and the economic arena.
At present, the two facets of this contradiction exist in parallel. On the one hand, out of force of habit we continue to work more hours, and this is complemented by the quest to reinforce our personal lives so that we may attain financial success, material well-being and complete happiness.
Byung-Chul Han (2012) suggests that we are living in a type of society in which the individual does not need an external power or agent that obliges them to work or exploits them. Our own demands to be successful, or simply to survive, mean that we work exhaustively. On the other hand, hedonism is no less important than rationality as an aspect of human behaviour (Eva Illouz, 2019). Both share a place in the same mental compartment of the individual and they contribute to explaining the economic behaviour of human beings in the capitalist system, be they producers or consumers.
We are living in a type of society in which the individual does not need an external power or agent that obliges them to work or exploits them
In fact, the current claims to personal fulfilment and emotional life acquire a moral force that is intertwined with the fabric of the capitalist workplace based on personal and individual effort. In this respect, the emotional capacity of both consumers and workers is exploited.
Bearing the aforesaid in mind, I ask myself: What will the future of capitalism be? In answering this question, I wish to focus on two aspects that I consider relevant to the future of capitalism.
First, the importance of the values of efficiency, competition and the freedom to buy and sell on which neoliberalism is founded, in addition to the relevance given to the pursuit of happiness. Personally, I consider that the importance attached to these values is based on purely instrumental reasons, since they justify the idea of continuous growth in capitalist economies, with the objective, supposedly, of improving the material standard of living of the population as a means for them to consider themselves completely happy.
However, we can clearly see that there is a large concentration of wealth and significant levels of precarious employment that arouse social concern. According to the United Nations Refugee Agency (2018), in 2016, 10% of the world's population with the highest income took around 50% of the world's total income, and this trend will surely continue. As for job insecurity, the International Labour Organisation (2019) has published data relating to France, Finland, Belgium, Italy, Croatia, and Spain on temporary contracts lasting 6 months or less. According to the ILO, these contracts accounted for 50% of all temporary contracts in these countries in 2017.
Furthermore, the unequal distribution of profits generated by economic growth in capitalist economies is having a serious negative effect on democracy, since it undermines one of its fundamental principles: equality. In addition to this, the deregulation justified by the neoliberal premises of capitalism has limited the margin that states have to effectively regulate and control the market, and this has been compounded by the non-existence of a supranational entity that is able to play this role. This implies that the centre of gravity of power and the distribution of wealth is shifting towards some elites who have an ever-increasing income in this process of neoliberal capitalist globalisation that we are experiencing.
Therefore, the question I would pose is: Why has capitalism caused this economic inequality that affects democracy? In my opinion, capitalism has made way for an individual who submits to the demands of the market, since it is the market that establishes the role to be played by the individual in this process, bearing in mind that the essential function of this process is the appropriation of unlimited capital.
Capitalism empowers individuals who have capital to fully develop, while those who do not have the possibility of accumulating capital are excluded or left in a precarious situation. The latter have no choice but to subsist in precarious economic and, consequently, social conditions. This is due to the fact that the capitalist model is based on the concept of defending private property. This defence has served to justify the capital appropriation model, which is exclusive, but at the same time excluding with regard to the fulfilment of the individual and their material satisfaction. This suggests that only a few people have the opportunity for full development, since their material needs, and well-being are being satisfied in the capitalist society in which we are living.
Capitalism has made way for an individual who submits to the demands of the market
Secondly, it is important to bear in mind that capitalism is an economic system, and as such it has an established life, which has functioned according to some specific rules (Wallerstein, 2015). As for the temporality of the capitalist system, Wallerstein (2015) states that every system goes through three important stages:
- The first is the moment when it comes to life.
- The second refers to the evolution of the guidelines that must be followed.
- The final stage is when it goes into crisis and ceases to exist.
With respect to the specific rules, there have been two:
- On the one hand, the pursuit of a constant accumulation of capital in order to continue accumulating capital. This is fundamental, since it explains why capitalism, with the explicit help it has been offered by the State in response to its systemic crises, has been able to survive over time and adapt.
- Secondly, there is the producers' need to maintain quasi-monopolies in order to achieve this constant accumulation of capital. This is due to the fact that it is not possible to obtain profits or genuine utility in a perfectly competitive system. For companies, obtaining profit implies and demands limits on competition in a freely operating market. The following data illustrate this idea. According to a report by the Economic Commission for Latin America and the Caribbean – ECLAC (2017) on foreign direct investment in Latin America, the 5 main car manufacturers accounted for 46% of production, while the 10 largest manufacturers accounted for 72%. Another example can be found in the Spanish electricity sector, where the three main electricity companies control 90% of the market. Furthermore, the trend towards mergers and acquisitions in developing countries shows a large concentration of companies in the period from 1990 to 2016, leading to the creation of oligopolies.
Merger and acquisitions in developing countries in millions of dollars
Nevertheless, the binding element of these specific rules of capitalism totally contradicts the essential premises of classical liberalism which paved the way for the creation of capitalism.
Its defenders considered it essential to discipline the market through the existence of competition between producers, in order to ensure that consumers had alternatives in terms of price and quality when choosing what could best satisfy their material needs. It would appear that this is no longer the case. I believe that the neoliberal discourse is used as an instrumental discourse that justifies this large concentration of companies and capital in the world, which is generating greater economic inequality. I also consider that, for this purpose, capitalism uses the basic premise of the individual's exercise of freedom, with the justification that this satisfies material needs.
The supremacy of fundamental rights and freedoms is seriously affecting the sovereignty of the collective will
To my mind, by giving priority and primacy to the right to private property, neoliberal capitalism turns that primacy into a paradigm of individual freedom, in which individual rights and freedoms become absolute priorities. However, this supremacy of fundamental rights and freedoms is seriously affecting the sovereignty of the collective will.
Why? Basically, because it leads to the assumption that it is not the place of citizens as a collective to exercise their will to decide on the path to be followed by the economy and, consequently, by capitalism. On the contrary, they are limited to choosing those who will take this decision on behalf of the collective. Moreover, the globalisation process itself and the fiscal power of states reinforce the importance of private property; as a result, any democratic control over private property or, consequently, neoliberal capitalism, becomes difficult to enforce.
In conclusion, there is no doubt that the spirit of capitalism and the pursuit of emotional satisfaction have only served as discursive instruments that justify egotistical behaviour, and this has only led to crises and economic inequalities in many parts of the world.
I believe that genuine economic success must go hand in hand with the general well-being of all economic agents. It would not appear that the mechanical addition of individual well-being and satisfaction can be turned into the general well-being and complete happiness of society as a whole. Therefore, reflection is required on the type of measures to be applied so that individual well-being can lead to a genuine general well-being and not just a discursive argument that justifies and benefits the constant accumulation of capital.
Otherwise, capitalism will have to continue searching for new transformations in order to survive, although these are unlikely to change the essence of the model, and this will encourage us to think about an alternative to replace it.
Cover photo: Families waiting for relief checks during the Great Depression/Dorothea Lange
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