The FT published an article yesterday that included this paragraph:
The central reason why Western democracy is in decline is that its capitalist bedfellow can no longer afford the financial demands that full-blown democracy is placing upon it. History has shown that capitalism can adapt, consorting with a variety of political systems in the past 5,000 years. Looking ahead, it will probably find another political host to aid its survival. Democracy – capitalism's host over the past century – is far more brittle.
The central argument of the piece, written by Michael Power, who is described as a strategist at Investec Asset Management, is that democracy has outlived its stay. Capitalism is no longer willing to afford the subsidies that it demands. Or, to unpack that just a little, the rich will not pay any more.
The argument is absurd. First, we have not had capitalism for 5,000 years. We have undoubtedly had markets that long. But they're not the same as capitalism. It's a basic error. Capitalism is a much newer phenomenon that was only really invented in the post-enlightenment era. And second, we have had forms of democracy for longer than that. So the premise is wrong.
But, so too is the idea that if the political system doesn't suit capitalism then we dispense with the political system. That's what the appropriately named Mr Power seems to be saying, but he does not correctly identify the locus of control in modern society. I know capital tries its best to be in charge. But I doubt it is. And even attempts to control the web - which is where the next class war will be fought - will not ultimately change this. I think the means for people to communicate are going to be exceptionally hard to control now, and in that case in the case of people v capital's power the people will win.
Mr Power is wrong.
But the FT needs to also do some thinking about those causes it might support. This one is very dangerous indeed.
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These graphs seem to indicate that the people have been losing out for quite some time at the expense of capital http://ubi.earth/wages.jpg
In American Net Neutrality is Trump’s next target, one that does favors for the powerful corporations, the war over communications and information which is power has commenced.
Worth checking out Mark Fisher’s short book, Capitalist Realism if you haven’t read it. The idea that capitalism has become so entrenched into our cultural society and collective conscience that we cannot conceive of any alternative. The good and bad news is, the planet simply will not allow the continuation of capitalism. There are natural limits to growth and we are already past some of them and fast approaching others. Some recognise this, others are in denial.
The use of the word ‘host’ is interesying. Parasites come to mind.
The American economist Michael Hudson has written a book “Killing the host” in which he argues how finance, insurance, and real estate (the FIRE sector) have gained control of the global economy at the expense of industrial capitalism and governments. The FIRE sector is responsible for today’s economic polarisation (the 1% vs. the 99%) via favoured tax status that inflates real estate prices while deflating the “real” economy of labor and production
he makes the point a parasite need the host but eventually kills it.
An argument not wholly dissimilar to line in Dirty Secrets on the rleationship0 between finance, tax havens and the global economy
“its capitalist bedfellow can no longer afford the financial demands that full-blown democracy is placing upon it.”
This isn’t a matter of “can/can’t” but of “don’t want to”
When just five men own almost as much wealth as half the world’s population, its clearly not shortage of wealth that’s the issue.
https://www.commondreams.org/views/2017/06/12/now-just-five-men-own-almost-much-wealth-half-worlds-population
Besides, almost everything posted here – by Richard, and those who respond to his posts – shows that even without a Wealth Tax, governments COULD meet the needs of everyone in their societies.
Of course, with a Wealth Tax, and tackling tax dodging and avoidance, and ensuring that labour receives a fair share of the proceeds of increased productivity, and all the many other ideas floated on this Blog, affording such needful services would be so much easier.
But let no one fall into the trap of believing it’s a case of “cannot”, when it is clearly a case of “will not”.
The FT should have had a leader rebutting this piece of pernicious special pleading.
Thanks. I was always under the impression that we had a system of mercantilism, and individual merchants, journeymen, tradesmen and labourers, etc, owned their own means of production, able to up sticks and change jobs at a moment’s notice. Once capitalism was becomimg the norm, politicians even referred to the new paradigm as ‘wage slavery’.
Precisely
The fact that FT can publish this kind of rubbish is astonishing.
As Wolfgang Streeck says in Buying time, it is not the workers that betrayed democratic capitalism
– it is the capitalists by taking an increasing share of output.
Democratic capitalist works better in countries like Sweden where workers are treated better.
It is not democracy holding the US and UK back, it is the lack of investment because shareholders are more interested in rent extraction.
Has Western-style democracy become too expensive a luxury for capitalism?
NO!
Rentier capitalism is too expensive a luxury for economic progress.
Precisely
Write to the FT Charles
Add my name to the letter….
If “rentier capitalism” is the problem you identify, then Adam Smith’s arguments about the economic importance of land become germane; and that suggests to me appropriate prescriptions would be best found in the form af a recalibration of taxation; with the balance of taxes skewed away from enterprise, labour and investment and towards AGR/LVT. I think that would provide an interesting FT letter.
What an ‘interesting’ article from Mr Power. And your analysis is absolutely spot-on. If his views carry any support within the corridors of corporate power, this could become the defining issue of the 21st century. People & the Planet versus Profit. While this battle is already been fought within a democratic framework, if ‘Capital’ sets about systematically destroying that framework then that’s unadulterated Fascism, isn’t it? While these tendencies are always somewhere beneath the surface, like racism, thankfully – at least since 1945 – an accommodation has been reached in the name of peace.
However, if wealth inequality continues along its current trajectory, then there will be pitchforks at the castle gate. I hope and pray you’re right that the People will be the victors but it will be a bloody fight. Power, when threatened with its very existence, doesn’t behave rationally. There’s an uncomfortable Orwellian feel to it. The stakes couldn’t be higher for future generations. However, having listened to Bernie Sanders I feel optimistic that they are up for it and, indeed, the fight to take back true democratic control is already under way – at least in the USA. But, as he himself says, it’s not going to happen overnight.
How does an idiot who suggests that capitalism is 5000 years old get an article in the Financial Times?
They need to up their game.
All good stuff above in response.
The article reeks of fear to me. ‘The pitchforks are coming’.
People expounding these views are those who know the game is up and that they’ve been rumbled but want to try to retain the status quo.
One thing Power is right about though is democracy: a democracy freed of an unquestioning over-adherence towards market thinking is a threat to the status quo. The way in which democracy in the West has been co-opted into market thinking (rather than the other way around as Adam Curtis suggests) has got capitalism into a crisis. Politicians have increasingly ceded power to the markets to meets people’s individual desires and needs which probably explains the poor state of our cities and environment.
And such a state of more balanced affairs is what we should work towards.
Government does not need to be co-opted in my view – it is the job of politics to meet the compromises needed so we have economic win-wins, not win-lose. As Charles says, the ‘over-extraction of rent’ is where things are going wrong.
Nicely put Charles.
Can the letter be reproduced here or at PP please?
Thanks you.
Let’s wait and see if they publish it first: it’s a condition of submission that they have first claim on it
Hilarious nominative determinism aside, this is deeply troubling stuff.
If this is truly how a significant number of top capitalists in the UK feel then they’ve totally lost the plot. It is extremely obvious that what has driven economic development since the Renaissance has been a virtuous circle of increasing understanding of reality leading to our increasing ability to harness it to our own ends feeding back into an improved understanding of reality.
Those states that failed to get as good a grip on reality as their competitors were left behind. The same will happen to any state today that starts believing its own propaganda and descends down the rabbit hole of free market libertarian fantasy.
Capitalism is already stifling scientific research by making everything about supporting the existing status quo. If they finish removing democracy then the intellectual climate will become incapable of pushing the boundaries of human knowledge wherever that knowledge conflicts with the power of the elite.
Intellectual, economic and social stagnation awaits. The only thing that’ll end it then is the inevitable ecological collapse.
I’ve just read it . A more unintelligent, jumbled bunch of nonsense it’s hard to imagine any serious newspaper printing let alone the FT . Capitalism’s adaptive capabilities as a system have just about reached their limit not because of democracy, but because there are 6.8 billion of us living on this planet and the exploitable land mass is not increasing in size and the 3 % growth over the last two hundred years is not sustainable in the future . The crash of 2008 put paid to that . I note he quotes the discredited 90 % of GDP deficit figure produced by the establishment apologist Rogoff ; the same number was adopted by Osborne as justification for his austerity policy .I’m glad I was able to read this piece without paying for the privilege . It seems the FT paywall had fallen down this morning.
“unintelligent, jumbled bunch of nonsense”
That is the essence of neoliberalism! What this means is if we can no longer buy off democracy then we need fascism. They’re clearly very spooked by Corbyn.
I wonder if Mr. Power is seriously detached enough from reality to believe this?
I remember reading this article the other year with a wry smile and think it quite accurate:
http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014
Yes Mariner,
Power needs to read that and take some insight from the class of people that he serves.
I don’t really like Ben Shapiro but his Q&A from 23:40 regarding inncome, capitalism and equality is fast to say the least.
https://www.youtube.com/watch?v=pJvxPy6xpOg
One might consider this to be in keeping with that oft stated precursor to establishment requirements which require popular acceptance: “Business needs X”.
Any attempt to question results in one being classified as anti-business.
X ranges over many values. The one which always makes me laugh is ‘certainty’. Business becomes monopoly managerialism.
“Certaintly”, certainly, that and ‘confidence’, or as Krugman frequently calls it, ‘The Confidence Fairy”.
A five year old seems to understand modern money more than our government 😉
https://twitter.com/WillBlackWriter/status/870054627886157824
Since I first read this post it has occurred to me that Mr Power quite probably has one of those media monitoring companies following responses to his article.
I hope so, and if so, I would like him to know that what capitalism cannot afford (from capitalism’s point of view) is the continued expansion of a disproportionate, rent-seeking finance sector that produces nothing as it continues to take an increasing share of gross national income and corporate profits.
In other words what capitalism cannot afford is more people like him. Beyond its smaller role in consumer credit, the finance sector’s only real function is to allocate capital to industry. What capitalism does not need is a parasitic finance sector becoming bigger than industry itself.
Another thing that capitalism cannot afford to have is a shrinking of the middle class or the 1% plutocrat class that continues to seize an alarmingly disproportionate share of the total wealth. For its own sake capitalism cannot afford to have its own mega-rich sucking the aggregate demand out of the economy.
When Mr Power was citing Rogoff’s discredited 90% deficit theory I wonder if he paused to consider that a lot of that deficit was accumulated post-2008 and, as such, represents rescue money in the form of fiscal stimulus and measures that were effectively (or literally) bailouts for speculators, spivs and banksters of his ilk, a class of people of that create the crises and complain about the remedy.
It seems that Michael Power has it all backwards. Ours is not a case where capitalism cannot afford democracy. Democracy cannot afford capitalism as we currently know it.
Charles Adams and I gave sent a letter to the FT
Good on you both, I would enjoy reading that. Like some others here I am not currently an FT subscriber so please post the letter on this site if they publish it (or even if they don’t).
As an Investec strategist I’m sure he’s not only mouthing what he believes but also the beliefs of many others with money. In essence he’s arguing for exactly what I outlined in the recent Progressive Pulse blog, ‘Partisanship and the end of Politics’,
http://www.progressivepulse.org/brexit/partisanship-and-the-end-of-politics-the-coming-of-the-neo-feudal-state/
and a development that’s been discussed off and on over a good number of years on your blog. That is, the emergence of a neo-feudal state. However, given the argument you advance in today’s blog, ‘Grenfell Tower deomstrates the need for real political choice’, I should perhaps add ‘potential’ to that sentence.
Let’s hope the roll back has begun