Three Irresolvable Crises of Capitalism

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Editor's note: This article is based on a presentation made on a Political Affairs panel at the 2011 Conference on Working Class Studies held at the University of Illinois - Chicago last June.

Among the serious crises facing civilization are three major ones created by modern capitalism that the system is inherently incapable of resolving – the growing wealth gap, the technological displacement of workers and looming environmental catastrophe.

A fourth crisis could be termed, the crisis of democracy. The growing wealth gap and the concentration of economic power in fewer hands continuously undermines democracy and democratic institutions. This is best illustrated by the flooding of corporate money into the electoral and legislative process and corruption of the US Supreme Court with the Citizen’s United case.

Capitalism is a system of inherent crisis based on the exploitation of labor by capital. It has lurched from one economic crisis to the next throughout its history due to the anarchy of overproduction. Today we are experiencing a different kind of global financial and economic crisis begun in 2007, on the scale of the crises of the Great Depression of the 1930s and the Panic of 1873.

But the crises being brought on by the wealth gap (which is also a major factor in the current economic and financial crisis), technological revolution and environmental crisis, are of a different overall magnitude, have reached a new quantitative and qualitative character, pose far reaching disruptive threats to society, and in the case of the environmental crisis, to the very existence of life on planet Earth.

These crises are beyond the capacity of capitalism to effectively resolve and reflect the system’s growing instability and its ultimate unsustainability. They represent a crisis for the system itself.

The havoc and suffering being wreaked on human kind and the planet by modern capitalism underscore the growing necessity for active social transformation to a sustainable, demilitarized, equitable and democratic economy and society. Such a transformation is necessary for human survival.

Transforming society requires a highly mobilized and conscious working class and people, majority movements led by organized labor and it’s allies at every level for democratic reform and socialism, that will “by degrees wrest control” of the direction of social development from the capitalist class.

But the most reactionary ruling class sectors of finance, energy and military industrial complex and those they influence politically especially the extremists dominating the Republican Party – represent the immediate danger and generally oppose even minimum reform at every step.

For example, the highly monopolized oil and energy industry is the creator and biggest funder of global warming deniers and drive reactionary, warlike tendencies in foreign policy.

Without a decisive defeat of reaction and the Tea Party extremists, the path to more fundamental democratic reforms and revolutionary change is not conceivable.

“Metabolic rift” between society and nature

Marxism views the contradiction between labor and capital as the main social contradiction; labor is the source of wealth creation which is privately appropriated by capital.

But as a growing trend of Marxists are rediscovering, Marx also viewed nature as the source of wealth, having said, “If labor is the father of wealth, nature is the mother.”

This illustrated Marx’s view of the dialectical relationship between Nature and society.

“Many lives from nature, i.e. nature is his body and he must maintain a continuing dialogue with it if he is not to die. To say that man’s physical and mental life is linked to nature simply means that nature is linked to itself, for man is a part of nature,” wrote Marx in the Economic and Philosophical Manuscripts of 1844.

Humans interact with nature for their existence and the reproduction of society. Marx referred to this interaction as a “metabolism,” much like any self-regulated, metabolic process in the human body or nature.

But he noted there is an inherent destabilizing, destructive antagonism between the capitalist system of production and nature, which has led to a “metabolic rift.” An early expression of this was the revolution in capitalist agriculture and the destructive tendency toward soil exhaustion.

I got to thinking further about these contradictions after learning how the city of Chicago is preparing for the consequences of long term climate change through implementation of a far reaching Climate Action Plan.

Even if greenhouse gas emissions are curtailed or reversed in the near future, the city’s climate will be like Baton Rouge, Louisiana according to climate experts. It will be wetter in the spring and fall and dryer in the summer. Extreme weather events will increasingly overwhelm the present day infrastructure. The number of 90 degree weather days will skyrocket and heat emergencies will endanger thousands of lives. These things are happening now.

Climate change requires many adjustments including planting different tree species, laying permeable paving to absorb the increased runoff, reducing the heat island effect and air conditioning all public buildings including schools. Everything, according to the Climate Action Plan, except shutting down the coal burning generating plants that are spewing greenhouse emissions!

Most climatologists recognize these changes are inevitable even if greenhouse gas emission is curbed today. The damage is done and even if we begin to reverse it, it will take many generations to heal the Earth.

Globally, the most severe damage and risk to life will be in the ocean coastal areas due to sea level rise and river flood plains in the developing, poorest nations of the world.

It will likely require the relocation of large numbers of people from areas that will be underwater, including perhaps parts of Manhattan.

Society has to begin implementing plans to anticipate these changes now on a grand scale while fighting to radically curb greenhouse gas emissions Total global costs to adapt to the new conditions and ultimately heal the Earth will be staggering and mean the reallocation of immense national and global resources, much that is either in the coffers of the rich or wasted on such things as military production.

Is there a natural limit to the capitalist reproductive forces of society and are we reaching those limits? Can capitalism deal with such problems? Certainly it’s a system constantly revolutionizing the means of production, highly inventive, fluid, flexible, adaptable and resilient. It could continue on for years in crisis and stagnation, especially given the current austerity policies being imposed in an effort to further redistribute wealth upward.

And it’s not that the capitalist class isn’t aware of these problems and doesn’t have some answers. Substantial sections are aware, especially of the environmental crisis. Al Gore even speaks of a “sustainable capitalism” and urges immediate action. Some do so on the basis of self interest, seeing their own fortunes at stake. Some even seek to profit off its solution, including through “cap and trade” schemes.

But the system as a whole is inherently incapable of reorganizing in a way that will be able to solve theses crises long term. The rivalries and conflicts of interest within the ruling circles make unity on a direction difficult if not impossible, and especially on the scale of action needed.

Some sections of the ruling class, gripped by the fever of immediate and maximum profits (especially in the energy industry) are compelled to pursue a death march, blind to the consequences.

Propelled by the profit motive, the system must constantly expand in all directions. The tendency is to intensify these contradictions and crises.

As the crisis of everyday life deepens, more people are being drawn into struggle to meet their needs and those of their families and communities. Each struggle heightens awareness and unity and helps people to gain a deeper understanding of the “nature of the system.” But it will take mass grassroots democratic movements on a much greater scale than present to win basic social reforms, and to take our country on a different path.

Growing wealth gap

The drive for accumulation of wealth and maximization of profits is an iron clad law of capitalist development, relentlessly compelling the system toward monopolization.

The system has developed from monopolization of the home markets to monopolization of global markets. This has developed to such a degree that most global production and financial sectors are now controlled by 6-8 behemoth transnational corporations.

“The share of foreign assets, sales, and employment represented by General Electric’s (GE’s) foreign affiliates rose from 36 percent, 38 percent, and 46 percent, respectively, in 2000, to 50 percent, 53 percent, and 53 percent in 2008—making GE primarily a global, as opposed to U.S., producer."

A similar trend developed with Ford, whose sales and employment of foreign affiliates now constitutes 58% and foreign assets 46% of its operation, note John Bellamy Foster, Robert McChesney and Jamil Jonah write in article entitled, The Internationalization of Monopoly Capital.

As far back as 1999, the Wall Street Journal noted:

In industry after industry the march toward consolidation has seemed inexorable….The world automobile industry is coalescing into six or eight companies. Two U.S. car makers, two Japanese and a few European firms are among the likely survivors.

The world’s top semiconductor makers number barely a dozen. Four companies essentially supply all of the worlds recorded music. Ten companies dominate the world’s pharmaceutical industry, and that number is expected to decline through mergers as even these giants fear they are too small to compete across the globe.

In the global soft drink business, just three companies matter, and the smallest, Cadbury Schweppes PLC, in January sold part of its international business to Coca-Cola Co., the leader. Just two names run the world market for commercial aviation: Boeing Co. and Airbus Industrie.

This development has also led to an increase in global labor solidarity including the beginnings of global trade unions for example in the steel industry.

As a consequence of this monopolization, the top one percent of wealthiest US families own half the nation’s wealth. In 2009 they had a net worth 225 times that of the median family net worth, the largest gap in history. In 1960 that gap was 125 times.

Since the 1970s wages have stagnated while productivity has soared. This extra surplus value created by this productivity has gone into the pockets of the rich.

Meanwhile, 43 million are living in poverty by official estimates, or 14.3 percent of the population. This is one in seven Americans, the highest rate since 1959.

Hundreds of billionaires and 10s of millions in poverty go hand in hand. The existence of one depends on the other.

The drive for maximization of profit engenders further economic and social inequality based on race and gender. While 9.4 percent of whites are in poverty, 25.3 percent of Latinos and 25.8 percent of African Americans are poor. communities of color face worse housing, schools, health care, infrastructure, environmental conditions, and access to fresh foods.

The growing wealth gap means today's youth will have a bleaker future – a lower standard of living, higher rates of permanent joblessness, part time and temporary work and a lifetime of debt associated with university education. Unemployment rates among African American teens are 90% in some urban areas. There are over 5 million African American youth between 18-24 who are out of school and out of work, which contributes to the "pipeline from school to prison."

At one time the US capitalist class needed a large highly educated and trained domestic workforce and a first rate infrastructure. Now with the globalization of production, it’s no longer an essential.

“The commitment of major sections of the transnational elite to a people-friendly public sector, a vibrant national economy and a modern society has waned in recent decades,” wrote Sam Webb in a recent article in the People’s World. “In fact, this elite is turning the state into its personal ATM machine and a military juggernaut to enforce its will at home and abroad. It's not an exaggeration to say that this social grouping has become a parasite sucking the life out of our government, economy and society, while living in bubbles of luxury, racial exclusion and class privilege and exploiting labor globally.”

The American Society of Civil Engineers has estimated it will take $2 trillion to modernize and bring up to code the US infrastructure. There is no outcry by large sections of US ruling circles to pour money into domestic development and bolster public education.

But austerity is in. Austerity measures are being imposed by global capital to radically cut labor costs, dismantle, diminish, privatize and eliminate government and rob social wealth.

This is a stark reality in Greece, Spain and Portugal and in Wisconsin, Ohio, Indiana and New Jersey. And the Republican right and Tea Party extremists will aggressively carry out such a policy for the entire nation if they win in 2012.

Wall Street has recovered from the “Great Recession” and is earning record profits. But this is being called a jobless recovery for workers, with a double dip crisis looming without substantial governmental economic stimulus.

Big business economists and mouthpieces of corporate “think tanks” speak of the “new normal”: eight percent unemployment, lower standard of living, less public services and less democracy.

The National Jobs for All Coalition estimates the current number of unemployed or underemployed in the US at 28.6 million or 18 percent off the population. In the African American and other communities of color, the unemployment rate is 20 percent. And among African American youth, 90 percent.

Without a policy of massive rebuilding of the country funded by a redistribution of wealth, these conditions will persist and worsen.

Technological displacement and outsourcing – twin capitalist "demons"


The capitalist system grew since 1750 at an average rate of 2.25 percent, said Marxist David Harvey. It is estimated three percent growth is needed to reduce unemployment to its pre-crisis state. Present growth rates are not close to that.

To sustain that level of growth previously, it took $.4 trillion yearly in profitable investment. Today it would take $1.4 trillion. By 2030 it will take $3.0 trillion. Harvey says this is not feasible.

Finance capital has invested little in the domestic manufacturing industry for the past 30 years. Instead they have exported capital and jobs to low wage zones globally and sought other more highly profitable investments. These include in the stock and mortgage markets, and the energy futures markets, in a phrase - making money from money. This has all led to uncontrolled financial speculation or “financialization” and to the current crisis.

Nevertheless, capitalism is a system that must constantly revolutionize the means of production. US workers are still the most productive in the world and the US is still the leading manufacturing economy.

New technological innovations, outsourcing to low wage zones and speed up allows the capitalist to compete globally. Commodities can be produced at lower cost allowing for the further expansion of markets. Capitalists are compelled to do this by the internal drive to maximize profits.

For example, between 1996-2006 alone US manufacturing jobs declined by 12 percent. Yet from 1998 to 2003 industrial output increased. The domestic steel industry produces far more steel today than it did 30 years ago with 400,000 less workers.

One study done in the mid 1990s suggested 90 million of 124 million jobs in the US workforce were vulnerable to technological displacement.

Labor saving technology displaces two workers domestic workers for every job outsourced overseas. These are interconnected phenomena.

The revolution in mass communications makes it possible to accelerate outsourcing of jobs abroad including high tech, governmental and administrative workers while accelerating the race to the bottom in wages and working conditions for all workers. Some state and local governments are outsourcing public sector jobs especially service centers.

It is estimated US corporations will outsource 3.4 million white collar jobs overseas by 2015.

The technological displacement extends to the retail sector. The first self check out system was introduced in 1992. In 2008 there were 74,000 self checkout systems in North America. This year it is expected to reach 215,000 systems, displacing thousands of workers.

Aside from the mass joblessness created by the worst economic and financial crisis since the Great Depression, the millions of workers being displaced by technology and outsourcing are superfluous.

According to the UN, globally there are some 200 million people unemployed, which is expected to persist for years to come.

Increasingly the workforce will either be highly skilled or unskilled and low paid. Capitalist global competition means a relentless drive to reduce wages, benefits, working conditions and environmental protections – the race to the bottom.

To extract maximum surplus value, capitalists pursue the dream of robotic production that never touches human hands, and are achieving it in places.

But replacement of human hand with automation also means more workers without purchasing power, and consequently a constriction of demand, and weakening of any economic recovery.

It underscores the need for radical economic reorganization and social reforms that can put 26 million to work healing the environment, rebuilding the nation’s infrastructure, developing new alternative sustainable energy sources, retrofitting the nation for energy conservation and expanding educational, cultural and recreational opportunities.

Further reforms are needed like lowering the eligibility age for Social Security benefits and increasing them to allow for early retirement, shortening the work week with no cut in pay and opening up the universities for free or low cost for continuous education and training, and creating a system of universal health care.

These are reforms dominant sectors of the US capitalist class will never undertake on their own, especially since the tendency is to “pull the plug” on modernization of the US infrastructure and downsize the role of government.

Capitalism’s war on nature

Historically, capitalism came on the scene as the most environmentally destructive economic system. The process of capital accumulation gouged the Earth, deforested continents, spoiled the oceans, over fished them, polluted rivers and waterways, fouled the air and exhausted the soil.

As environmental problems arose and resources became scarcer, the solutions necessitated by expanding production meant ever greater environmental destruction.

Today’s mountain top removal, fracking and degradation resulting from the extraction of oil from the Canadian tar sands are some of the most vivid examples.

Today, the ecological crisis is accelerating and the Earth is reaching or has surpassed key tipping points in planetary systems that will alter life for thousands of years. If the present rate of accumulation of greenhouse gases is not reversed, the Earth will become uninhabitable for humans and all living species.

This “metabolic rift”constitutes a basic contradiction between the relentless and destructive expansion of capitalist production and the finite resources of the world and the planetary systems that sustain life.

Scientists have identified planetary boundaries that must not be surpassed in order to sustain life on the planet. Nine have been identified: climate change, ocean acidification, stratospheric ozone depletion, nitrogen and phosphorus cycles, global freshwater use, change in land use, biodiversity loss, atmospheric aerosol loading and chemical pollution.

In three cases boundaries or “tipping points” have already been surpassed – climate change, the nitrogen cycle and biological diversity.

Climate change is causing extreme weather conditions – excessive heat, droughts and flooding. It is estimated 70 percent of the Earth’s land surface will experience drought conditions. It is projected agricultural production will be reduced by 30 percent in the US and globally.

Global climate change will force hundreds of millions of people to relocate from low lying and coastal areas. There is and will be growing competition over energy, water, food and other scarce resources leading to the possibility of conflict.

These are urgent issues facing the US working class and people and the world as a whole. The resolution of these crises, the redirection of policy and resources, can’t wait until “socialism”  and must be part of today’s struggles.

Mass struggles can and must force necessary reforms and regulations on capitalist development, to regulate it’s destructive capacity and force the redistribution of wealth and redirection of resources toward the needs of the people.

But capitalism is inherently limited and it is increasingly apparent more fundamental reforms are necessary. To solve the urgent problems requires the massive reallocation of social resources, global cooperation on an unprecedented scale, and a reorganization of production to meet human needs not profits.

The struggle to redistribute the wealth to create millions of living wage jobs through expanding education, universal health care, mass transit and affordable housing, modernizing the infrastructure, and building a sustainable, demilitarized, democratic economy that begins to heal the Earth can unite a majority of Americans and is the path to democratic socialism.

Photo by Infrogmation of New Orleans/ cc by 3.0

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  • Hi John,

    Just some feed back to you on your article. Unless you have some exposure to Political Economy --- it is very difficult for the lay person to get a sense of what you are attempting to convey. The prose in your article is very academic sounding and if your goal is to educate people on how the global economy is/may impact daily life --- more elaboration on the relationships between Capital and Labor may need to be provided.

    Let me provide you with an example of how a manager of capital lays out the economic crisis ---from the standpoint of capital of course --- in very clear terms their point of view to the general public

    Onelove.

    Ali Hangan
    Pomona, California

    The writer is founder and co-chief investment officer of the investment management firm Pimco the world's biggest Bond trading company located here in Irvine, California.

    America’s debt is not its biggest problem
    By Bill Gross, Wednesday, August 10, 3:48 PM
    Washington Post

    For a few days there it seemed like President Obama was the master of the bond market. This is a Triple-A nation, he intoned on Monday, and always will be a Triple-A nation no matter what some rating agency says. As if in applause, Treasury bonds rallied furiously in price and yields sunk to cyclical lows. Unfortunately, what they were applauding was the slow growth and perhaps recessionary future that an AA-plus nation faces with too much debt and too little fiscal flexibility to increase demand.

    It is critical for politicians and investors alike to distinguish between cause and effect, disease and symptom. Washington has been operating the past few months under the assumption that the United States and our euro-zone economic trading partners are experiencing a debt crisis that must be resolved by exorcising excessive spending in the near term. To Republicans, and even many co-opted Democrats, the debate starts with spending cuts and how much must be done to appease voters and the markets, both now and in November, when the “Gang of Twelve” committee that resulted from the debt-ceiling deal potentially follows through with its mandate.

    Revenue increases may be part of the solution, but even then, at some imbalanced ratio of spending cuts — such as three or four dollars of spending cuts to one dollar of tax hikes — the thesis assumes that markets and economic growth require what in essence is a fiscally contractionary step, reminiscent of International Monetary Fund policies in emerging markets during past decades. We must, the consensus goes, become like Argentina, Brazil and Mexico from the 1980s: Tighten the budget via spending cuts, reduce the deficit and voilá — economic growth will blossom.

    But while our debt crisis is real and promises to grow to Frankenstein proportions in future years, debt is not the disease — it is a symptom. Lack of aggregate demand or, to put it simply, insufficient consumption and investment is the disease. Debt has been simply an abused sovereign and private market antidote to sustain it. We and our global market competitors are and have been experiencing a lack of aggregate demand for several decades. It is now only visibly coming to a head, as the magic elixir of leverage is drained and exhausted. This potentially fatal disease of capitalism is a result of several long-term secular phenomena:

    (1) Aging demographics, where boomers everywhere spend less, in contrast to their youth, as they approach retirement; babies, houses and second cars shift to the scrapbook of memories as opposed to future spending power.

    (2) Globalization, where 2 billion new competitive workers from Asia and elsewhere take jobs and paychecks from complacent and ill-trained 40-somethings in developed markets.

    (3) Technological innovation, where machines and robots displace human labor, resulting in corporate profits but declining wages.

    The debt crisis as it crests ultimately gives way to these growth-inhibiting, spending-contractionary secular forces. Having run up our credit card to keep on spending, we have reached market-enforced limits that force deleveraging. It is not the debt, however, but the lack of global aggregate demand that is at the heart of the crisis. As the entire world strives to put its own people to work before other nations do, policymakers constructively lower interest rates and delay sovereign, corporate and household defaults to provide breathing room. Fiscally, however, an anti-Keynesian, budget-balancing immediacy imparts a constrictive noose around whatever demand remains alive and kicking. Washington hassles over debt ceilings instead of job creation in the mistaken belief that a balanced budget will produce a balanced economy. It will not.

    The president and Congress must recognize that an AA-plus country, to remain AA-plus, must focus on growth, not debt reduction, in the short term. We have a debt problem — but primarily a crisis of aggregate demand. A 21st-century Keynes would have recognized this and sounded the alarm, pointing out that policymakers from a fiscal perspective are pointing us toward recession and the destructive 1930s instead of a low-growth but still breathing U.S. economy of the 21st century.

    Posted by Ali Hangan, 08/20/2011 7:24pm (3 years ago)

  • Wouldn't it be great to credit the thinkers behind the above ideas - I. Meszaros and JB Foster? Credit where its due, folks...

    Posted by Comrade, 08/12/2011 5:16pm (3 years ago)

  • There has never been, nor will there ever be a marxist state that does not devolve into despotism. Capitalism is a natural state as it embraces competition and natural selection. Marxism is an unnatural, unstable philosophy which is why it ALWAYS devolves into fascism.

    Posted by scott jacobi, 08/11/2011 4:34pm (3 years ago)

  • That figure of 200 million unemployed worldwide? Are you counting babies and dogs?

    Posted by Tesa, 08/09/2011 3:18pm (3 years ago)

  • Appreciate this look at the several problems cannot solve, but the third paragraph from last says our mass struggles can and must force necessary reforms on capitalist development. Which is it, unsolvable or solvable?
    Most of the problems listed weren't this bad in earlier stages of capitalism, so were they "solvable" then? Other capitalist countries have moved much further than the United States on some of the issues, so have they "solved them?"
    I like the original assertion that these problems cannot be solved by capitalism, but the reason is because capitalism is fundamentally competitive and the only real resolution of these problems would entail cooperation among different capitalist nations, as the article correctly points out in the 2nd paragraph from the last. Capitalist nations have never been able to reach that level of cooperation before, and I do not think they will. Thus, the original assertion in the essay is correct.
    --jim lane in Dallas

    Posted by JIm Lane, 08/09/2011 12:14pm (3 years ago)

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