Does Capitalism Have a Future?

INTRODUCTION

Historical sociologists like myself are good at predicting the past, but the future is another matter. It is especially difficult to predict the future of major social institutions like the nation-state or capitalism. It becomes easier if one believes that the institution in question is a “system” with its own internal logic of development, its own cycles, its own contradictions. Then we could identify the current logic of development and project a likely future. Many do believe this is possible in the case of capitalism. Neoclassical economists believe that capitalism involves regular business cycles with an inherent tendency to move toward equilibrium. So after the present difficulties of capitalism, there will come recovery, then another crisis followed by another recovery, all probably on an overall upward trajectory of development. Those who perceive deeper, less frequent but more threatening cycles, like Kondratieff or Schumpeter, have also seen them as having some internal regularity and (in the case of Kondratieff) predictability. Even Keynes, who regarded the concept of equilibrium with some skepticism, did not deny that in the long run it would be reestablished, though with a little help from the state. These models tend to convey the image of capitalism as eternal (though not Schumpeter). Marxists also see capitalism as having an inner logic of development, but they see it—as they see all modes of production—as possessing systemic contradictions which will eventually bring it down.

The systemic element is explicit in what is called world-systems theory, whose major theorist is Immanuel Wallerstein. The only difficult part of prediction for such Marxists and systems theorists lies in the question of what will succeed it (for many of them have lost their confidence that the future is socialist). Since most intellectuals pontificating about capitalism come from the West, and since Western capitalism is obviously experiencing contemporary difficulties, doom scenarios for capitalism are currently increasing in popularity.

I wish I could share these confident visions of the future, whether optimistic or pessimistic. There are three reasons why I cannot. First, the main obstacle is my general model of human society. I do not conceive of societies as systems but as multiple, overlapping networks of interaction, of which four networks—ideological, economic, military and political power relations—are the most important. Geopolitical relations can be added to the four as a distinctive mix of military and political power, the mix varying between what are conventionally called “hard” and “soft” geopolitics. Each of these four or five sources of power may have an internal logic or tendency of development, so that it might be possible, for example, to identify tendencies toward equilibrium, cycles, or contradictions within capitalism, just as one might identify comparable tendencies within the other sources of social power. Take, for example, the cycles of attack versus defense, or mobility versus solidity, or the continuous escalation of firepower, all of which are internal tendencies of military power relations; or the long-term growth of the modern state, or the replacement of empires by nation-states, which are predominantly tendencies internal to political power relations. Ideologies, however, have distinct cycles of development, according to whether a dominant ideology seems to “work” or not, and which of the alternative ideologies currently on offer as a solution to crisis is adopted.

These different dynamics are “orthogonal” to one another. That is to say, they interact but not in a systematic way. This means that we can only identify up to a certain degree “internal” dynamics within a power source, since each is not absolutely autonomous from the others, and the development of each affects the development of the others. Once we admit the importance of such interactions we are into a more complex and uncertain world in which the development of capitalism, for example, is also influenced by ideologies, wars and states. I will demonstrate this when I seek to explain two previous crises of capitalism, the Great Depression and the present Great Recession. Unfortunately, it makes predicting the future much more difficult.

Second, complexity is heightened by the fact that planet Earth is a very big place, in which nation-states and macro-regions differ considerably from each other, so that the general tendencies just identified affect some countries and regions more than others. There might now be a really serious capitalist crisis in Greece, but only a slight one in neighboring Turkey, and almost none in China. These differences might also generate different trajectories of world-historical development, indicating for example that China might be economically overtaking the United States, or Asia the West. Macro-regional shifts have many historical predecessors.

Yet the emergence of nuclear weaponry ensures for the first time in the history of the world that any rivalry between them is unlikely to be resolved by war. But not impossible—and this raises the third complexity. Human beings are not rational calculating machines. Sometimes they face complex problems to which there is no obvious solution. Sometimes they are driven not by instrumental rationality but by what Weber called value rationality, sacrificing personal calculative interest to an overall ideology. Sometimes they are driven by strong emotions overpowering reason. So human actions are often unpredictable. In the 20th century humans often took decisions which seem to us today to have been irrational—going into two devastating world wars or seeking an utopian total transformation of human society. There is no reason to think that the twenty-first century might be different.

Thus the best I can do in the way of prediction is to pose possible alternative scenarios. I will consider whether the end or, less dramatically, the decline of capitalism might be nigh for America, for the West, for the whole global economy, or for the whole planet Earth. Some of my scenarios will be more optimistic than others, some will have more coverage of the earth than others, with the likelihood of each being affected by capitalism’s complex interactions with other sources of power and other crises. I will try to assign some degree of probability to these scenarios, though these are really only rough guesses.

SYSTEMS AND CYCLES

I am skeptical of theories which depict a terminal crisis of capitalism as a single system (with two possible exceptions to be explained later). Take, for example, Wallerstein’s notion that the “capitalist world-system” is in crisis. His system has two parts. The first is the “internal” crisis of capitalism, given by the logic of capital accumulation and expressed in terms of worsening Kondratieff 50–60 year cycles of boom and slump. The next slump, he says, will be much worse and may indeed finish off capitalism (he hopes so, anyway). We are now entering a systemic crisis of capitalism, he says, because profit levels are falling and they will almost inevitably keep on falling.

The second part is a geopolitical crisis manifested in longer-term “hegemonic cycles.” Hegemony means domination. Crises come in the transition period between different hegemonic regimes. His examples are the transition from the hegemony of the Dutch Republic to that of the British Empire, and again from British to American hegemony. These geopolitical cycles tend to be of more variable length than the economic cycles. From the Netherlands to Britain spanned just over one hundred years, from Britain to the United States took fifty. American hegemony is now declining and will be soon ended, he says, after a reign of about seventy to eighty years. He is understandably unsure of what is to follow. He does posit Chinese hegemony as one possible future, but he seems to think it more likely that there will be no single hegemon. Given his Hobbesian view of the human need for a single Sovereign, that bodes ill. He does not see the two crises of capitalism and hegemony as undercutting or complicating each other. Instead at certain junctures crises of both the capitalist and the hegemonic cycles coincide and reinforce one another to produce a systemic crisis of the whole.

This is a succinct theory, full of insights, but I have difficulty in accepting either half of it. First, consider his list of historical hegemons. The Dutch Republic seems a bizarre choice as Europe’s first hegemon. In the late 17th century the Dutch pioneered some capitalist institutions, they defended themselves well on both land and sea, and they acquired a few colonies. But they never dominated Europe, let alone the rest of the world. The Habsburgs and France were the leading powers at this time in Europe, but the continent (and its empires) had essentially multipower geopolitics. Britain was more dominant in the 19th century, for it was the leading industrial capitalist power with the biggest navy, the biggest empire, and for a time the reserve currency, but it was never hegemonic over the continent of Europe and it relied on a balance of power between other states to protect itself. Wallerstein then sees a period of rivalry between two potential hegemons, Germany and the United States, before the latter triumphed. He describes the period 1914 to 1945 as a “thirty years war” between the two, an odd description for wars into which America only entered tardily, and only when attacked by Japan in the second war. American hegemony was indeed established after World War II, but mostly as the unintended consequence of a war started by the suicidal fascist and military bravado of Germany and Japan, though these did succeed in finishing off the British and French Empires. US hegemony over much of the world was completed by the Soviet Union turning inwards into economic autarchy. Such a contingent set of outcomes resulted from complex interactions among all four sources of social power. The United States was already in the interwar period the leading economic power—though without World War II the dollar would have probably shared reserve status with other national currencies—but had much less military or geopolitical power. The outcome of the war was that America became the great historical exception, the only global empire, the only true hegemon the world has ever seen. But with only a single case, it is hard to identify hegemonic cycles. Nonetheless, I do agree with Wallerstein that the United States has been hegemonic in the recent past, that its hegemony is now weakening, and that it may well end sometime around 2020 to 2025. This unique world-historical process may lead to a crisis specific to the United States.

What about the supposed Kondratieff cycles, successive waves of upswings and downswings of almost fixed duration? Kondratieff suggested that his K-waves lasted 54 years. If so, since the economy hit rock bottom in 1933, it should have risen for 27 years until 1960 and then declined until another low point of 1987, and then boomed to peak in 2014. It doesn’t feel like an upswing today! Those following in his footsteps have dated cycles in two different ways according to whether they are measuring swings in prices or production volumes. Some see 1972–1973 as the beginning of an upswing (since prices rose), others the beginning of a downswing (actually production did not fall but its rate of growth slowed—at least in the West). The two world wars produced further disagreements: did an upswing end in 1913 or 1929, and did another upswing begin in 1938 or 1945? There is little agreement about such cycles, which makes us doubt their regularity.

Wallerstein has his own version of K-waves. He says the last upswing (in production) began in 1945 and peaked in 1967–1973. That seems true of the Western part of the economy, but this was less the product of a cycle internal to capitalism than of the end of World War II, which had provided an extraneous economic stimulus. A globally regulated capitalism agreed upon initially by Britain and the United States and then agreed to by all US allies was established, and it could thrive on pent-up consumer demand, forcibly restrained during the war, combining with wartime technological improvements to generate an unprecedented “golden age,” with growth greater than ever seen before and spreading across almost the whole world. Following this period the economy in the West remained fairly stagnant from about 1973 until 2000, when the upswing should have begun. It hasn’t yet, a decade later. But note that for large parts of the world the boom continued after the West faltered and is still continuing for some countries. First Japan, then East Asian countries and China, then India, then the other BRICs have all experienced booms. K-waves are controversial even among economists studying the West, but for much of the Rest they seem irrelevant.

Upswings and downswings are inevitable in capitalism and it may be that after a long up-swing actors become overconfident and head for a harder fall. Certainly bankers and home buyers did in the first decade of the twenty-first century. But any precise, regular patterning seems elusive, while truly global patterns are rare. Yet it may be possible that past crises might give us some kind of guide to a future crisis of capitalism. So, being a believer that theories must be based on detailed empirical study, I turn to the two most severe, best-evidenced crises in the history of capitalism, the Great Depression and the present Great Recession.[1]

THE GREAT DEPRESSION

Both crises had multiple causes. Most of these were predominantly internal economic causes, as we might expect since these were economic events and capitalism does have a degree of “internal” logic. But some causes came from outside the economy, and some were rather contingent. In both cases crisis began with one serious problem which then turned by stages into something greater as it “found out” and exacerbated other weaknesses, hitherto overlooked, some economic, some not. The whole process might easily have gone otherwise. It also hit unevenly across the world, leaving some national economies virtually unscathed, while some countries escaped quite quickly through effective policies. All these are reasons for doubting that there is a single systemic logic at work. Unfortunately they also lessen the chances of predicting economic crises in the future.

The Great Depression began with overproduction in agriculture (partly due to World War I) and was then racheted upward by a gold standard no longer maintained (as in the prewar period) neither by cooperation between the central banks of the Great Powers nor by British hegemony, as Barry Eichengreen has shown. Individual countries returned after the war to the gold standard in an ad hoc way, mostly at unrealistic levels driven by ideologies of national pride and honor more than by pragmatic economic analysis. Also contributing were geopolitical tensions between Germany and Austria, on the one hand, and France and Britain on the other. France and America hoarded gold. There was ideological attachment by old regimes to laissez-faire economics, a stock market bubble, and an uncompleted transition from old to new forms of manufacturing, all of which lowered the employment potential of the economy. In America, the eye of the storm, grave policy mistakes were also made by Congress and by the Federal Reserve Board rooted in the market fundamentalism of this period which reached its ghastly climax in what was called “liquidationism”–the pursuit of austerity measures in order to destroy inefficient firms, industries, investors, and workers. Absent any two or three of these varied causes cascading on top of each other and we would have been labeling this a cyclical recession. But the cascade was by no means inevitable.

The Depression is often treated as being global but it struck unevenly. It struck Western Europe and the Anglophone countries hard, though even in these zones the United States, Canada, and Germany lost six times as much per capita income as Britain did, and three times as much as France did. But after the first dip the Depression barely affected large swaths of the world. China was only slightly affected, while the Soviet Union, Japan, its colonies Korea and Taiwan, and Eastern Europe continued to grow through the Depression. So the Depression was in reality less than global. Perhaps we should really label it the Great White Depression, for the white race was the worst affected. Some countries then got out of the Depression relatively quickly by leaving the gold standard and reflating their economies. The United States eventually did this, but the Roosevelt administration’s overconfidence that recovery was underway led it to deflate in 1937, which produced a “double-dip” recession. In fact, only the enhanced industrial demand of World War II enabled a full recovery in the United States.

It is obvious from all this that noneconomic causes were quite important. As an example, I pick out the role of military power relations in the crisis. World War I had significant influences on the Depression. During the war many poorer countries had been able to greatly increase their agricultural exports. When agriculture in the combatant countries came back onstream after the war, this generated overproduction and so there were serious price falls. But the war had also destroyed the consensual gold standard, and the failure of the peace treaties to solve geopolitical rivalries made international cooperation over political economy more difficult. Crisis was not the necessary outcome of multipower geopolitics, for these had produced economic stability before the war; it was a consequence of the geopolitical legacy of a particularly terrible war.

The systemic argument could be supported if the war had been caused by either capitalism or declining British hegemony, but neither was the case. Europe had for centuries before the arrival of capitalism been an unusually warlike continent, war was still the default mode of diplomacy, and this war, like many previous wars in the continent, was started when major powers went to the defense of their minor clients (now Serbia and Belgium). Militarism was a European tradition (see my The Sources of Social Power Volume 3, Chapters 2 and 5). In the Great Depression different causal chains came together like tributaries swelling into a great river, with various minicrises cascading into a deeper crisis as they “found out” further weaknesses; that the different shocks kept coming had not been anticipated by anyone.

THE GREAT RECESSION, 2008

The vital question here is whether the present recession will continue, worsen, and even perhaps set in motion forces which might bring down capitalism. However, let me first briefly analyze its causes. We also find a cascade pattern here. The recession began as primarily an American crisis with several causal chains coming together. First, American hegemony and consequent global imbalances enabled the government and ordinary Americans to borrow vast sums of money from abroad at negligible interest rates, building up debts that eventually proved unsustainable. Second, the consequent increase in interest rates burst the mortgage bubble and this triggered the first actual shock. However, this causal sequence also required input from politicians’ ideological commitment to creating a “property-owning democracy,” a nation of home-buyers. The third main cause was that this occurred after a demolition of financial regulation; and the fourth was grossly widening inequality in the United States. Both of these last two were inspired by the conjunction of neoliberal ideology and bankers’ and top managers’ power within the American political system. This can be partly attributed to an American shift from manufacturing to financial services which helped make short-term “shareholder value” the main corporate goal. Similar causes operated in the United Kingdom, for finance capital and neoliberalism were dominant in both countries. These causes were not so pronounced in most other countries, though the German phobia concerning inflation (caused by the historical myth that inflation had caused the rise of Hitler) was compatible with the policies urged by neoliberals, and German economic power within Europe transmitted this fiscal conservatism across the continent. Military power did not matter in the Great Recession, but ideological power did, in the form of neoliberalism and inflation phobia.

These pressures then “found out” the whiz kids of the financial services sector. Their mathematical equations had led to a misplaced confidence in abstruse financial instruments with less and less relationship to the real economy. They had converted the ideology of neoclassical economics into mathematical models of risk, falsely believing that economies are purely market systems all of whose principal parameters can be precisely calculated and predicted. Almost no-one had foreseen that the various elements of risk might cascade on top of each other.

Crisis was then diffused internationally not because American hegemony was in decline but because America, its economy, its dollar, and its mathematical economists remained hegemonic. The decline in US economic activity then affected countries with debt problems and also countries which were major US trading partners but which had been “virtuous,” not seduced by debts or greatly widening inequality, neoliberalism, or finance capital, like Germany and France. Closer scrutiny by scared investors then “found out” sectors and countries whose debts were also revealed to be unsustainable once the recession and capital contraction started. In 2007, just before the recession, IMF figures for European states show that only Greece and Italy had public debt levels slightly higher than their GDPs. The average level of government debt across the EU was slightly lower than among the OECD countries as a whole (71% to 73%). Only in Greece was the level of government debt the real problem. In Ireland, Spain and Italy (as in America and Britain) it was private debt that had rocketed—though the main weakness of the Italian economy was its low level of productivity. These economies all had different weaknesses which might not have been “found out” without the American-driven financial crisis. But when recession struck and was worsened by austerity policies, lesser economic activity meant lesser revenues, and so government debt now rocketed everywhere.

The crisis in Europe then worsened when the recession “found out” a quite extraneous weakness of the Eurozone which turned the recession into a major sovereign debt crisis, caused in the first place by the zone’s own internal imbalances. There had been a big outflow of capital from the richer EU countries to the poorer ones, with the Greek government contributing its distinctive dose of fiscal dishonesty. But this crisis had only intensified because of the enthusiasm of the elites of the seventeen eurozone countries—not their peoples and not the elites of the remaining ten EU countries—for “deepening” the Union through a common currency without ensuring adequate backing of the euro by a central bank with treasury and fiscal functions. This was a structural political weakness. The elites knew they would not be able to adequately back up the euro if weaker countries the size of Italy or Spain went to the wall. But as convinced Europeanists they were willing to take this risk even though their national electorates would have rejected any proposal to create a single treasury, and they knew this because the voters had opposed a milder deepening of the EU in each of the last three national referenda held in eurozone countries. For these elites political ideals had trumped their economic sagacity to produce a terrible policy mistake. The European crisis was then worsened by the depth of the austerity programs being pushed for different ideological reasons by both Britain and Germany and forced on the weaker European economies. A contingent conjunction of different economic, ideological, and political causal chains (not military in this case) still threatens to cascade into a much worse “double-dip” recession.

Again, however, the Great Recession spread very unevenly around the world. From World Bank data on GDP growth we can see that almost every country had a difficult 2008 or 2009. In this brief phase the crisis was indeed global. It then deepened in the United States, and across Europe as far east as Russia and its eastern neighbors, and in some poor indebted countries. But by 2010 numerous countries had bounced back to achieve their highest GDP growth rates of the 21st century—including important countries like Brazil, Mexico, Turkey, Nigeria, Canada, Malaysia, Korea, and Singapore. India and Indonesia recovered to almost their previous highest levels, while China’s official growth rate fell from about 10% to 8%, still the envy of the world! All these countries except for Canada are what we used to refer to as “underdeveloped” countries. Most of them had learned the lessons of the structural adjustment decades and had built up reserves to avoid large debts to foreigners. Those countries which had not acted in this way were worse affected. Canada escaped because its newer extractive industries meant a lesser role for the banking sector, which it also kept tightly regulated. That might have been enough for escape in other countries. If this became a systemic crisis, it was one that could have been evaded by different policies.

So like the Great Depression, the Great Recession was only disastrous for some countries. The American virus did spread across the world, mainly through financial channels, though the reduction of international trade mattered too. But many countries got out quickly because they had different structural arrangements, some economic, some political, some ideological. The main structures that worked were: corporatist or developmental states (South Korea); economies whose strong growth did not include a large financial sector (most of them); little neoliberalism (most of them); or merely having prudent policies like the avoidance of foreign debt (most of the Asian cases) or maintaining strict regulation of finance capital (Canada). Almost the whole of South and Southeast Asia plus Oceania, a very large macro-region, was little affected for these reasons and also because this region traded heavily with China (important for the Australian recovery). As in the Great Depression the right policies could minimize the damage, the wrong policies could worsen it. The politics and ideologies which flourish within different macro-regions matter for the outcome. Thus the sovereign debt crisis of the eurozone came as the diffusion of the American crisis interacted with different causal chains—the distinctive political rhythms and institutions of the European Union, and the ideological preference for austerity and avoidance of inflation of German (and British) elites. The internal logic of capitalism in many developing countries would intrinsically lead to further growth. If there is a threat to this it comes from outside, from the self-induced weaknesses of America and Europe.

Will the present crisis worsen and engulf almost everyone? If the eurozone collapses, that would obviously be terrible news for its countries, but it would also have a major global impact on trade and investment. It would immediately hit hard the non-eurozone European countries, like the United Kingdom, since they trade with and invest in the eurozone more than anywhere else. The hit would also reach across neighboring countries, from Russia through the Near East and North Africa, as well as to America, a major trading partner of, and investor in, Europe. South America would suffer as well, especially from a collapse in the Spanish economy. If both the EU and America experienced economic contraction then the effect on global trade would be very bad, since they provide almost half of world GDP and the level of economic globalization is now higher than ever. India and especially China would also find their exports decline significantly. That would indicate a systemic crisis of capitalism, worse than the “double-dip” recession predicted by many. Yet even so it would be probably worse in the West than among the developing Rest.

This cascade might actually happen, though the eurozone countries may be able to cobble together a financial fix, since it is the elites, not the masses, who control the EU, and by now the elites have realized that they have common interests in finding a solution, at almost whatever the cost. The problem here (as elsewhere) is that the financial resources now available to bail out or stimulate the economy are less than in 2008. I emphasize, however, that human action and political will matter considerably, which means we cannot actually predict the outcome. However, I will predict that if many more countries take the neoliberal austerity route through this recession, as proposed by American Republicans and actually implemented by the British Conservative government, and if the inflation phobia of Germans reinforces this, then another Great Depression, this time quite likely to be more globally systemic, will follow. If, however, the Europeans realize and act on their collective interests and if countries take the more Keynesian route being advocated by the French government of financing a stimulus (partly by higher taxes on those who are more able to pay), then this might prevent further worsening. In either case, recovery would probably eventually happen, though more slowly in the former case—and this time without the benefit of a world war. Whether recovery would ever restore full employment is something I will discuss later.

Capitalism is subject to cycles, though whether they have a regular patterning through time is another matter. Occasionally the recession phase of the cycle gets much worse, partly through “internal” economic causes, partly through costly wars, stalemated politics, or ideologies generating policies inappropriate to the crisis. In both major cases of Depression/Recession this was an important cause of worsening, the first time because no other plausible macroeconomic ideology had yet emerged, the second time because it came after a long period of market growth ended by the apparent failure of the Keynesian alternative, followed by deregulation, especially of the financial sector. Political and geopolitical relations matter as well, and they seem much less predictable. There do seem to be economic lessons to draw from these crises which in theory might reduce the likelihood of future crises. But it is far from clear that powerful elites have drawn the appropriate lessons. Neoliberal austerity programs inflicted on economies in recession unfortunately recall the unhelpful role of liquidationism at the beginning of the 1930s. Note also that in the 20th century the two terrible wars had absolutely contrary effects, further worsening the problem of prediction. The first war helped intensify a recession into the Great Depression, the second substantially contributed to the biggest boom of all—and to American hegemony.

AMERICAN HEGEMONY AND ITS DISCONTENTS

It is therefore possible that America will suffer the greatest economic decline in the near future. Wallerstein suggests that the period of greatest American strength was 1945–1970, after which there has been continuous decline. I am not so sure. The American share of the world’s total GDP actually declined from 1950 to 1970, because of the recovery of Japan and Europe. It then remained virtually static from 1970 to 2005 as the United States successfully exploited the advantages of having the dollar as the reserve currency of the world. A relative decline has occurred since then, largely a product of the higher growth of India and China, but the dollar remains almighty, America can still borrow unlimited cash at an interest rate of lower than 2%, and in most years it still outperforms Europe and Japan in economic productivity and growth. The IMF and Barry Eichengreen have both guessed that the dollar will remain as the world’s reserve currency until some date soon after 2020. The United States also has 48% of the world’s military expenditure, its highest-ever percentage, and it retains its dominance over patents, Nobel prizes, elite universities, and popular culture. America remains hegemonic, for better or for worse.

It will not last, of course, and there are suspicions that premonitions of decline are just beginning to haunt Americans. Its gigantic military has experienced what are in effect defeats over the last decade. Its political and ideological power relations have reached near-crisis level. Rising divisive inequality has been deliberately encouraged by politicians. The merging of top management and big corporate investors (especially the bosses of insurance and pension funds) so that they are essentially paying themselves exorbitant salaries and bonuses (on which they only have to pay 15% rather than 35% tax rates) also grossly widens inequality. The combination of regressive taxes, corporate plundering, and anemic economic growth has led to economic recession and to ideological alienation.

But American alienation is not currently leading toward a political solution, since it has generated two opposed notions of what should be done. One, led by the Republican Party, blames government for the economic ills of the country and proposes to reduce its size, its regulatory powers, and its taxes in order to restore a market-driven prosperity. Its preference for austerity measures as a way out of recession makes it uncomfortably close to the “liquidationist” strategy which deepened the Great Depression. The other solution, proposed by liberal Democrats, blames big corporations and banks, symbolically labeled as “Wall Street,” and proposes more government regulation, more redistributive taxes, and a more state-sponsored Keynesian path to growth through increased public expenditures. The current political stalemate and especially the deeply reactionary, backward-looking stances of the Republican Party do not augur well for America’s ability to meet these enormous future challenges. America suffers from anomie, an absence of shared norms, as well as alienation—Durkheim as well as Marx. (as Durkheim argued, anomie lessens social cohesion and fosters decline).

Republicans’ proposals of austerity for the masses but prosperity for the rich are seen by them as job-creating measures, but the rich do not consume much. Instead they save, producing capital surpluses and lower interest rates, encouraging the consumer debt which brought on the recession in the first place. This threatens the basis of the mass consumer demand economy on which American wealth has rested during the postwar period. Republican ideology has also turned increasingly against science, which does not bode well for the future of America. The Republicans are more united over economic policies than are the Democrats, whose main problem is internal divisions. This has allowed the Republicans to dictate recent policy agendas. Republican leaders used to be ideological in their rhetoric but pragmatic in their actual policies. But free-market fundamentalism is more resonant in American popular culture than is state interventionism. In the postwar boom period real economic policy took the form of “commercial Keynesianism,” state-steered markets, a compromise between market and state. But the political rhetoric of the time, especially on the Republican side, focused almost entirely on free markets and free enterprise. Americans had actually gotten a large state, but they pretended they had not. So appealing to free markets has a political edge today because it is more ideologically rooted in America than are appeals to a beneficent state. The electorate as well as the politicians may not be able to embrace useful economic policies.

There are other American weaknesses too. There are very high military and health expenditures—both more than double those of any other country. These achieve very poor outcomes in terms of military interventions abroad and in terms of mortality and longevity statistics at home. Yet they are still regarded by politicians as being near-sacrosanct, as is the credo of no new taxes. Thus their draining of economic resources and their increasing of the public debt are likely to continue, adding further burdens on the country. These weaknesses in all four sources of social power might bring America down. We cannot know for sure. Americans remain highly inventive and hardworking. Their industries remain mostly dynamic. They might be able to put their ideological, financial, military and political houses back together again. If they don’t, then when the dollar loses its reserve currency status, Americans will be less able to borrow and their military will decline unless they are willing to pay much higher taxes—which seems unlikely. US hegemony will end sooner or later in this coming half-century, and the end might not be graceful.

But that need not cause a systemic crisis of capitalism. The successor to American hegemony is unlikely to be another single hegemonic power—not China, not India, not any other individual state. Their growth rates are stratospheric now but they will inevitably decline toward more normal levels once they reach a more mature level of industrialism and postindustrialism. They will also have crises of their own to surmount. No country will be as powerful in the future as the United States has recently been. Human society will be in uncharted waters, moving toward more multipower politics and to a coordinated basket of reserve currencies. This has been the normal state of affairs in human history and it has not served the world economy too badly. It was accompanied in the first half of the 20th century by devastating war, but there are now reasons to believe that inter-state war is a thing of the past—especially when Americans lose their enthusiasm for war.

But that list of countries who have so far escaped lightly does reinforce the sense that economic power is shifting from the old West to the successfully developing countries of the Rest of the world, including most of Asia. The likeliest scenario in the medium term is a sharing of economic power between the United States, the European Union, and the four BRICs (Brazil, Russia, India and China)–but amid world peace. Since the BRICs’ economies—and especially those of Russia and China—contain more state regulation than most Western countries—and especially the United States—the capitalism of the medium term is likely to be more statist.

THE EXHAUSTION OF CAPITALIST MARKETS?

Here I shift to the long term. So far I have been skeptical of notions that capitalism has general “laws of motion” that lead regularly to systemic crises. I have depicted major crises of the past and present less as singular and systemic than as cascades of distinct causal chains, both economic and noneconomic, piling unexpectedly on top of each other, sometimes rather contingently. So far crises have also struck unevenly across the world and they have been responsive to shifts in geoeconomic and geopolitical power. Previous crises have not really signaled world-system weaknesses. Instead they have indicated geographical shifts in power within global capitalism and within global geopolitics.

But in this book neither Immanuel Wallerstein nor Randall Collins draws on previous or present crises when envisaging the possible end of capitalism across the globe. Rather they identify secular tendencies of capitalist development which they believe may doom it in the future. They argue that there are finite limits to capitalism’s ability to sustain profit and employment. They firstly cite the geographic limits of planet Earth’s markets. They note that capitalist growth is steadily filling up planet Earth. They also note that capitalists in the advanced countries solved the problem of low-growth phases by exporting manufacturing to places where cheaper, less-regulated labor yielded them greater profit. This is what some have called the “spatial fix” to capitalist crisis. Jobs were moved from the American North to the American South, then to Latin America, then China, then Vietnam, and the process will continue into Africa and central Asia. Collins is especially worried by what he sees as the export of middle-class intellectual labor to other countries of the world. So what happens when all these regions are absorbed and capitalist markets fill up the Earth?

Wallerstein suggests that it takes about thirty years from the entry of major investment in a rural country to get workers sufficiently organized to force wages up and capital out. So when the Earth has filled up, labor costs will be high everywhere and profits will fall. Capitalists will try nonetheless to reduce wages but they will now be dealing with a globally organized working class. It will resist, producing a global crisis of capitalism. This scenario will take a while yet. Only a part of the enormous populations of India and China have as yet been absorbed into a minimally regulated industrial or postindustrial economy. That will take more than thirty years. Moreover, the process hasn’t yet begun in Africa or central Asia so that such a fill-up may take up until the end of the 21st century, especially since population growth is projected to continue until near the end of the century and it will be biggest in the poorest countries.

However, I find this model of an earth reaching the limits of economic markets difficult to understand. If there is no cheap labor left, capitalists can no longer reap superprofits from this source, but the higher productivity of labor and increased consumer demand in newly developed countries might compensate for this and produce a reformed capitalism on a global scale, with more equality and social citizenship rights for all. This would not mean the end of capitalism but rather a better capitalism in which the whole planet would enjoy the kinds of rights enjoyed by workers in the post-World War II West. After all, in that period the vast bulk of the wealth of the advanced countries was created through trade and production among themselves, not with the rest of the world (oil excluded). The boom of the postwar period came mainly as a result of a high productivity/high consumer demand economy of the advanced countries themselves. It did not mainly depend on highly exploited Southern labor. Why should this not be so in the future, but for the whole world?

Moreover, new markets need not be restricted by geography. They can also be created by cultivating new needs. Capitalism has grown adept at persuading families that they need two cars, bigger and bigger houses, more and more electronic devices. Whoever dreamt of this fifty years ago? What will our grandchildren consume fifty years from now? We cannot begin to envisage their consumer fads, but we can be sure there will be some. Markets are not fixed by territory. Planet Earth can be filled and yet new markets can be created. That, of course, depends on what some have called the “technological fix” and it is more or less what Joseph Schumpeter called “creative destruction,” which he identified as being the core of capitalist dynamism—entrepreneurs pour money into technological innovation which results in the creation of new industries and the destruction of old ones. The Great Depression in the United States was partially caused by the stagnation of the major traditional industries, while the new emerging industries, though vibrant, were not yet big enough to absorb the surplus capital and labor of the period. That was achieved in World War II and the aftermath, which then suddenly released enormous consumer demand held back by wartime sacrifices.

So the vital question now is whether another technological fix is occurring or is likely to soon occur. There are new dynamic industries like microelectronics and biotechnology. But the problem is that so far they have not been big enough to provide a satisfactory fix, especially for the labor market in the West, where the new industries tend to be more capital-than labor-intensive. The decline of manufacturing industry in much of the West has generated unemployment there which the newer industries have not been able to much reduce. Recent innovations like computers, the Internet and mobile communication devices do not compare with railroads, electrification and automobiles in their ability to generate profit and employment growth. The “Green Revolution” has been the recent exception, providing a great boost to agricultural production, mainly in the poorer countries. Also important has been the expansion of the health and educational sectors, which are more labor intensive and in which the labor is more intellectual and more middle class. Their expansion is likely to continue, as the length of life, and especially of old age, and educational credentialism continue to increase.

Randall Collins is quite persuasive in his enumeration and then rejection of various possible scenarios whereby human societies might fight against the scourge of declining employment. Yet the reverse is happening right now. Economic expansion over the last few decades has actually produced a growth in global employment, greater even than the substantial rise in world population. Between 1950 and 2007 job growth was about 40% higher than population growth. In the Organization for Economic Cooperation and Development (OECD) an organization representing the richer countries of the world more people are also working than ever before, though the absolute number of unemployed has also risen because the population is larger and a higher proportion of the population seeks jobs, including far more women. The liberation of women in the formal labor market has been the biggest problem for employment in the West. But the global unemployment rate remained fairly stable between the 1970s and 2007, at around 6%. Even through the Great Recession ILO statistics collected by the International Labor Organization reveal that global employment has continued to grow, though at only half the rate before the crisis and unevenly distributed across the world. It fell in 2009 in the developed economies, including the European Union (by 2.2%) and its neighbors, and in the ex-soviet Commonwealth of Independent States (by 0.9%), but it grew in all the other regions of the world. The employment-to-population ratio also fell back in the advanced countries, and in east Asia, but elsewhere by 2010 this ratio was back to the 2007 level. Unemployment is as yet a Western (and to a lesser extent a Japanese) not a global problem.

The West’s loss is the Rest’s gain, and the world as a whole benefits. Yet the future of labor markets in the advanced countries may be labor shortages, not high unemployment. The length of life is still growing and the birth-rate has fallen below the level necessary to reproduce the population. Europe, Japan and North America will need substantial immigration to make up the gap. Since these demographic tendencies are likely to continue as other countries become more developed, overall world population is predicted to begin falling in the second half of the 21st century. These are reasons why mass unemployment may not eventuate and precipitate the end of capitalism.

As Collins says, there is no necessary reason why capitalism should be indefinitely capable of generating enough creation to compensate for the destruction. There has simply been a long period in which this happened. But equally, there is no necessary reason why creative destruction should end. Who knows what new needs the development process will create? I suggest one further creative sector later.

But supposing the pessimism of my colleagues is correct. This might produce one of two alternative futures which seem to me to be more likely than capitalist collapse. The first is a rather pessimistic capitalist scenario in which structural employment remains high and a “2/3–1/3” society emerges. Two-thirds are well educated, highly skilled, in regular employment, doing quite well, but with a third excluded from this society. The poor might receive enough welfare and charity to keep them from revolting, or they might be repressed. They would be a minority, so their chances of successful revolution would be small. It is a distinct possibility that the included would not sympathize much with the excluded. They might have negative views of them as worthless dropouts, scroungers, welfare queens, etc. In some countries ethnic or religious minorities would be overrepresented among the poor, and negative ethnic/religious slurs would be added to these stereotypes. The excluded might become a hereditary lower class, reinforcing the gulf between included and excluded. Most of the included would vote to maintain this gulf, while many of the excluded would not vote. The extent of welfare might continue to differ across the West, with countries like Sweden and Germany being willing to keep the poor within mainstream society, while countries like the United States might not. We can recognize this pessimistic scenario, for it is already present in the United States, and sociologists have perceived its rise in Europe too. It would be the final demise of the working class—but not of capitalism. It would produce an asymmetric class structure such as existed through most of history, now with capitalists well organized, workers divided and less organized. Social institutions survive even when they do not perform very well, unless counterorganization emerges among the oppressed.

It has not yet emerged, and this scenario is especially chilling for leftists—a more exploitative but unchallenged capitalism. Never has the global left been so weak as today. The World Social Forum, a global organization of radicals headquartered in Porto Alegre, Brazil has been a significant force in the period during which Southern protests against Northern/Western oppression were rooted in global capitalist exploitation by the West. But the “South” is developing yet also ceasing to exist as a coherent whole. This is now evident in recent climate change discussions in which China, India and Brazil have joined forces with the West and Japan to delay emissions reductions, against the objections of poorer countries.

The second alternative scenario is more optimistic. It agrees that capitalist markets will fill up the planet and that profit and growth rates will fall. But it suggests that this will stabilize into an enduringly low-growth capitalism. That would not be new, of course. Capitalism’s great breakthrough came in 18th and 19th century Britain. Yet the British growth rate never exceeded 2% in any one year. The British success story was rather that an average growth of just above 1% per annum continued for a very long time. In the 20th century, however, the pace quickened. Between the wars, the most successful developing countries (Japan, its colonies, and the Soviet Union) achieved historically unprecedented growth rates of around 4%. Then in the late 20th century China and India (and now others) achieved growth rates of around 8%. Though those rates have endured for at least two decades, they will inevitably decline. Then Africa and Central Asia might do even better. But they all have a lot of time before they might be reduced down to the 1% level of the historic British success story. Maybe the American and European rates might decline more quickly to this level but in the current Great Recession only a few countries saw negative growth rates, and then only for a year or two. Why should a growth rate of 1% be a capitalist crisis? Why cannot capitalism continue as a low-growth global system, which it was for much of its history? The 20th century—more precisely, the period 1945 to 1970 in the West and the end of the 20th century in the East—would then be seen as exceptional. This low-growth scenario would also reduce the role of speculation and downgrade the power of finance capital, with repeats of our present Great Recession (which are at present quite likely) becoming less likely. Of course, as labor conditions improve throughout the world, that is very good news. Then all of humanity might live in an almost steady-state economy, like the Japanese have already done for the last twenty years. The future of capitalism might not be tumultuous, but boring.

If forced to choose one scenario as the most likely to occur sometime around 2050 (if nothing else in the meantime interfered), I would plump for a lower-growth global capitalism spreading more equality of condition across the world but carrying a casually employed or unemployed lower class of somewhere between 10% and 15% of national populations, a mixture of the two scenarios depicted above and very much like the 19th century industrializing countries. I would not predict much revolution.

There is a further obstacle to revolutionary change. The communist and fascist revolutionary alternatives to capitalism were disasters, and they are the only ones to have emerged so far. There are no other alternatives around and almost no one wants to repeat either of those. Socialism, whether revolutionary or reformist, has never been weaker. Fundamentalist Christianity, Judaism, Hinduism, and Islam are the surging ideologies of the world and they tend to contemplate otherworldly as much as material salvation. This-worldly alternative ideologies of the 20th century failed. In poorer countries brought into the global economy we might expect the rise of socialist or similar movements, but they are likely to become reformist. Modern social revolutions have almost never occurred without major wars destabilizing and delegitimizing ruling regimes. In the two biggest revolutions of the 20th century, in Russia and China, world wars (with different causes than capitalist crises) were necessary causes of revolution. Wars are thankfully in decline around the world—in fact only the United States continues to make interstate wars—and there are no anticapitalist revolutionary movements of any size in the world. Revolution seems an unlikely scenario. The end really is nigh for revolutionary socialism.

The future of the left is likely to be at most reformist social democracy or liberalism. Employers and workers will continue to struggle over the mundane injustices of capitalist employment (factory safety, wages, benefits, job security, etc.), and their likely outcome will be compromise and reform. Developing countries will likely struggle for a reformed and more egalitarian capitalism just as Westerners did in the first half of the 20th century. Some will be more successful than others, as was the case in the West. China faces the severest problems now. The benefits of its phenomenal growth are very unequally distributed, generating major protest movements. Revolutionary turbulence is certainly possible there, but if successful it would likely bring in more capitalism and perhaps an imperfect democracy, as happened in Russia. America also faces severe challenges since its economy is overloaded with military and health spending, its polity is corrupted and dysfunctional, and the ideology of its conservatives has turned against science and social science. All this amid the inevitability of relative decline and the growing realization that American claims to a moral superiority over the rest of the world are hollow. This seems a recipe for further American decline.

THE END OF THE WORLD?

Yet all the scenarios I have sketched so far might be thrown out of gear by two other potential crises which might be even greater than the two world wars. Both are absolutely novel and both would be truly systemic and global. These would not be confined within national or macro-regional borders since they emerge out of the atmosphere all humans breathe.

The first global threat is the military one of nuclear war. The severity of this threat is almost completely unpredictable since it depends on a whole sequence of events any one of which might not happen. So far there have only been two-power confrontations, first the United States (and its British and French allies) against the Soviets, then India against Pakistan, flanked by a rather passive China. In these cases the threat of mutually assured destruction has been obvious to the two sides and the response, after a couple of half-crises, has been disciplined avoidance of escalation. Nuclear deterrence has worked.

However, when more than two powers are involved in more complex conflicts, outcomes become more fraught. It was multipower conflicts in which some could not read the intentions of others which produced both world wars. In the Middle East Israel already has nuclear weapons, Iran is nearing that goal, and that might provoke neighboring powers to drive for them as well. That would be dangerous for the Middle East, for their neighbors, for much of the world’s oil supplies, and even for the whole world. These arms races have little to do with capitalism. If nuclear war did break out, then capitalism would be seen by any survivors as having been only a minor player in the disaster. However, maybe Iran will be persuaded away from nuclear weapons; maybe Saudi Arabia, Iraq and Turkey will not retaliate by acquiring them; and maybe human reason can even surmount the dangers posed by multiple rival powers armed with nuclear weapons. Yet then there is the possible scenario of terrorists stealing a nuclear weapon. Who can predict the outcome here since some terrorists do appear to be motivated by otherworldly goals? Theirs might be the most dangerous ideology ever.

The second systemic crisis is in contrast highly predictable—unless extraordinary evasive action is taken. Climate change is happening (I deal with this in Volume 4, Chapter 12). The air, sea and land are warming while also experiencing more fluctuations in temperatures, predominantly because of human actions. The threat is global, since greenhouse gas emissions anywhere affect people everywhere. These emissions come flanked by other disaster scenarios: food and water shortages, polar icecap and tundra melting, seawater inundations, etc. Millions of people are already dying prematurely as a result of global warming and the survival of a few poorer countries will be threatened within twenty to thirty years unless human societies radically change the direction of their development.

If humanity does act in time to substantially reduce emissions, it has to radically challenge and reform the three major institutions which have achieved such success over the last century. The first one is capitalism—though only because this is now the dominant mode of production in the world. State socialism in its heyday was just as destructive of the environment. As radical environmentalists say, we have to get society off “the treadmill of profit.” This might mean disciplining business through a severe regulatory “command and control” state, or through taxation levied on the throughput of resources in enterprises, or through market mechanisms like stringent “cap and trade” programs which provide incentives for capitalists to turn toward investment in virtuous low-emissions industries. If such policies are pursued rigorously, capitalism will survive, even if far more regulated. Since many industries are not high-emitters, there need not be united capitalist opposition to such policies. This might also provide another phase of “creative destruction,” in which low-emissions technologies generate profits and new jobs. Some entrepreneurs are already banking on this and switching into investment in alternative fuels, wetland and forest preservation, and other environmental novelties. At present alternative energy technologies do not create more net jobs in the world, but this might change if they became the norm. A recent report from the Copenhagen Consensus Center suggests that net job gains could be made in the alternative technology sector if several conditions were met: rapid technological innovation, rapid progression of economies of scale, global implementation of similar green policies, and perhaps adoption of protectionist measures such as tariffs or local content requirements. Tax policy could also be directed at job creation. If taxation is levied on the total throughput of nonrenewable resources and not on either business or labor in general, as at present, then that would encourage the hiring of labor. This could be the next wave of creative destruction. It would certainly destroy the fossil fuel industries.

Not only capitalism has to be reined in. We have to also rein in the treadmill of the nation-state’s obsession with growth. All nation-states measure national success by GDP growth and yet this increases environmental degradation. That means reining in political elites who believe that they can only retain power by promoting short-term growth within the period of a single electoral cycle. A low-emissions regime would certainly reduce growth in the short run, while hopefully increasing it more in the long run, given that in the long run the do-nothing “business as usual” scenario will prove disastrous for the planet and its inhabitants. But who lives in the long run? Politicians certainly do not and nor do electorates. Moreover politicians and voters still live in the era of nation-state sovereignty where there is great resistance to any curtailment of that sovereignty by foreigners. Yet regulation would have to be international, with intergovernmental agreements severely limiting the autonomy of any nation-state to do its own thing.

Maybe the environmental movement will eventually persuade capitalists, political elites, and voters to begin serious reduction of emissions. Maybe the European Union can lead the way over the sovereignty barrier, since it has already done so in other spheres. But for any of this to happen, we have thirdly to rein in the treadmill of “consumption citizenship” according to which the people demand more and more economic growth in order to consume more, as a citizen right. Ordinary citizens will have to change their lifestyles to avert disaster, but disaster appears abstract and faraway—until it actually happens.

The three great triumphs of the modern period—capitalism, the nationstate, and citizen rights—are responsible for the environmental crisis. These causal chains emanate principally from the economy, though as mediated by political power relations, and the problem is bigger than simply capitalism. All three triumphs would have to be challenged for the sake of a rather abstract future, which is a very tall order, perhaps not achievable. If success were attained, this would reinforce capitalist tendencies toward lower growth. The restrictions would involve much more political regulation, though through international agreements by states acting collectively. It would be a new type of swing away from markets to states, not exactly socialist but a new form of market-regulating suprastate collectivism. The present chances of any of this happening seem slight. America is not only unwilling to begin any of these three struggles but it will not sign up to even minor emissions programs. China does embrace emissions programs and its party rulers have the power to press ahead with them, but all their efforts are overwhelmed by the sheer pace of Chinese industrialization—as is also the case in India and other successfully industrializing countries. I would predict that little emissions mitigation will be undertaken until tangible climate impacts begin to strike hard on the world at some point in the mid-21st century.

Things look torrid on the climate front. Perhaps a technological breakthrough might occur. Neither solar nor wind power are at present offering this, but current experiments with cold fusion, or a radically different solar battery, or concentrated solar power using molten salt, might eventually yield significant results—but not “clean coal,” which is just a smokescreen set up by the coal industry. Perhaps the global masses will be stirred up by green movements into persuading politicians into more green policies; perhaps capitalists in low-emissions industries will provide a powerful counterweight to the high-emitters; perhaps entrepreneurs and scientists can jointly pioneer another phase of creative destruction centering on new green technologies. At the moment any of these possibilities is not on the horizon. Of course, if there is an enduring global crisis of capitalism, and world production heads downward, then (after a delay during which already “baked in” emissions will continue upwards) emissions will stop growing and even begin to decline. Conversely, if capitalism, nation-states, and consuming citizens are reined in, then GDP growth will decline through global consensus and everyone will be content with almost zero growth. Every cloud has a silver lining!

But if action is not timely, and climate disaster begins to strike hard, the optimistic scenario would be that at that point the world’s states would take coordinated action to impose severe restrictions on capitalism, states and citizens. Alternatively, if this did not occur, various disaster scenarios can be envisioned: of relatively favored states, richer ones in the North of the world, erecting great barriers of “fortress capitalism,” “fortress socialism,” or “ecofascism” against the rest of the world; of mass refugee starvation; of resource wars (though perhaps not war between nuclear powers). Whether our successors might call these regimes “capitalist,” “socialist,” “fascist,” or whatever, malice would be their ultimately defining character trait. It is of course impossible to predict what human beings will do when confronted by such a threat.

CONCLUSION: THE END MAY OR MAY NOT BE NIGH

I have presented a model of alternative possible scenarios which I believe is the closest we can get to predicting the future. I hope firstly that I have shown that modern society and modern capitalism are not systems. They are influenced by multiple overlapping networks of power, each with their own distinctive causal chains. The most important of these are ideological, economic, military and political. In their possible future interactions some things are clearer than others. First, the United States is losing its hegemonic position in the world—even its enormous military power does not seem able to achieve national interest goals. This seems almost inevitable: the end of hegemony is nigh. Indeed, American power might sink further if its multiple current weaknesses cascading across all four sources of social power are not remedied. Second, the European Union is in a comparably threatened position, though its present economic difficulties are exacerbated mainly by a single political weakness, the unsupported euro. For Europe almost everything depends on solving this problem, which is primarily one of political and ideological rather than economic power. Third, power in the global economy will continue to shift from the West toward the more successful parts of the Rest and on balance this will involve more political regulation of capitalism. All this is fairly clear.

Further scenarios are murkier. If we follow Schumpeter in seeing capitalism as “creative destruction,” creation might become the province of the developing Rest, destruction the province of the West. Yet this seems less likely than a return to the multiple power networks of previous eras, this time organized globally. But forces emanating from within the economy will probably not lead to a global crisis of capitalism. More probable is that global economic growth will slow once a more equal distribution of power in the world is reached—a move perhaps toward a stable, prosperous, but low-growth capitalist economy. This would be a rather happy prospect for the world except that it might involve a minority “excluded” class of somewhere between 10% and 20% of the population.

However, all of this might be thrown out of kilter by either of two rogue global crises, nuclear war or escalating climate change, the first of these the result of a causal chain emanating from outside of capitalism, the second of a causal chain bigger than capitalism. Either of these might provide the end, not only of capitalism but also of human civilization. The insects would inherit the earth. But finally, in all these affairs nothing lasts forever and policy decisions matter considerably. Humanity is in principle free to choose between better or worse future scenarios—and so ultimately the future is unpredictable. We sometimes act rationally, though usually only with short-term time horizons, and we sometimes act emotionally, ideologically and irrationally. That is ultimately why we cannot predict the future of either capitalism or the world.