Greed at the heart of capitalism
Most mainstream media critiques of the US and world financial crisis point to greed as the underlying culprit. The implication is that if the financial CEOs were not so greedy, the meltdown would not have occurred. This kind of analysis however entirely misses the point about the nature of capitalism, especially monopoly capitalism.
Capitalism is built and thrives on, in fact requires and rewards greed-- the more excessive the better. By greed we mean the relentless drive for the most profit--wealth appropriated from the labor of others --with the least scruples, in order to reinvest and gain even more profit in a continuing spiral of thievery and rapacity or, plainly put, exploitation and oppression.
In the 80s, the proponents of the “free market” dogma and “neoliberal globalization” as a policy framework dug up and bannered the argument of laissez faire capitalism that greed ought not be considered a negative attribute since it is a necessary and powerful force for driving social progress. Greed was presented as the crucial motor of the capitalist system.
Of course, it wasn’t called greed then; it was decked out as individuals simply motivated by self-interest. Adam Smith’s theory of the “invisible hand” of the market provided the rationale that the individual drive for self-gain magically self-regulates and transforms itself into the common good.
Certainly in its free competition stage, the capitalist system rewarded those who were most "efficient" and productive; that is, bottom-line, those who could produce the most with the least labor power (read: wages paid). The boom-bust cycle was the system's way--the proverbial "invisible hand" of the market--not only of solving the problem of overproduction resulting from the anarchic rush to produce the most where the profit was highest; it was also a way of getting rid of the scrupulous and rewarding the greedy.
With the rise of monopolies and their dominance over national governments, free competition capitalism became a thing of the past, but not the drive for maximum profit. Monopolies controlled not only their particular lines of industry but government itself, and thereby the entire economy. But controlling the government and the entire economy did not solve the problem of overproduction which continued to be the result of increasing productivity while constricting the market by minimizing wages.
Simply put, when workers' and other toiling people's wages are kept to the minimum while production is pushed to the limit, then a point is reached where the economy stops growing, with more and new products out that can not be bought and no new capital created, because consumers do not have the money to buy the things they make. Manufacturing thus becomes less and less profitable, and capital, like water that has nowhere to go, tends to stagnate and putrefy. Capitalism reached its lowest and deepest slump during the Depression Years of the 30s.
In the 50s, Keynesianism was designed to save capitalism from its internal contradictions. The wealthy allowed government to tax the rich and use the revenue to pump-prime the economy, e.g. spending big on public infrastructure, thus creating jobs, and providing improved access to social services and state welfare benefits. Banks were regulated to keep the financial markets from spinning out of control. Labor unions were encouraged in order to pacify the working class, giving them a stake in the status quo while immunizing them from embracing socialism as an alternative system.
In the 1970s, the capitalist crisis of overproduction reached a new nodal point when partial recovery resulted not in the usual "boom" but in an entirely new phenomenon, and thus a new addition to the English language—“stagflation"--stagnation accompanied by inflation.
By the 80s Keynesianism was discarded and replaced by neoliberalism as the favored economic doctrine. It was resorted to in order to (1) break down the national barriers and regulations that restrict the flow of goods, allowing the expansion of markets and the exploitation of cheap labor, (2) make more funds available to finance capitalists from social service funds, subsidies and other government social expenditures, and (3) remove the barriers and regulations that restrict the flow of capital, especially speculative capital, thereby allowing finance capitalists to reap immense profits from non-productive investments.
“Neoliberal globalization” was pushed by the economic gurus of universities and think tanks, international multilateral bodies like the World Bank/IMF and the World Trade Organization, multinational corporations, the governments of the advanced capitalist countries and their dependent and client states. Neoliberalism became conventional wisdom and was reified as the free flow of goods, information, money as well as democratic ideals and practices that would lead to global peace and prosperity.
By the 90s “globalization” was exposed by the dramatically catastrophic train of events such as the Asian financial crisis that reverberated on to Russia, Brazil and recoiled as well on Europe and the US causing further misery for developing countries and the world’s peoples. This was followed closely by the bursting of the Japanese bubble and stagnation in Europe, while the US was flaunting its "New Economy". But by 2000, the US could not escape the crisis of overproduction, with its manufacturing sector slowing down, unemployment and household debt rising, national debt, trade and budget deficits soaring.
The US resorted to the "war on terror" to stimulate production and pump-prime the flagging economy. The illusion of recovery was thus conjured, the basic problem of overproduction papered over. Finance capitalists made a killing with mortgage and investment schemes that added to the illusion of prosperity and growth. The profit-making schemes were so lucrative, because unregulated and frenzied, that the biggest investment houses and banks worldwide cut into the action. Until the bubble burst.
In conclusion, the capitalist dilemma cannot be resolved by mere enlightenment on the part of capitalists, i.e. how they moderate their greed. As a system, capitalism is founded on the appropriation by an elite few of the major part of the wealth created by the mass of working people.
Ever wondered how come the pioneering captains of industry and the new financial oligarchy ended up gorging on the feast at the table while the rest of society must make do with their leftovers? Ever wondered why the advanced capitalist countries especially the US appeared to be on an endless road to superprofits and superpower domination while the rest of the world seemed doomed to poverty, misery and abject dependence?
It’s not just greed but the way the system works!
*Published in Business World
16-17 October 2008