The price of frenzy

Capitalism’s tendency is towards concentration. In its late phase, that concentration is fundamentally financial, which causes the distortion of the entire economy, as it becomes oligarchic and all for profit. The resulting inequality ultimately mines the system, for whose bailout elites resort to progressively more absurd and unfair solutions. Only a democratic, public and massive response will manage to thwart this unholy tendency. With the collapse of state socialism over twenty years ago, and the following rise of neo-liberalism, a new ideology settled in the world –and not only among elites- with the following characteristics: distrust towards the State, contempt towards the public sector, revalorization of the private sectors’ selfishness, blind trust in the ‘free market’, economic discourse hegemony before any other politic and social discourse, channelization of talent and ambition towards goals of exclusive profit, and the enthusiastic prevalence of financial management as the economy’s main ‘product’. This ideology was devised and transmitted from think tanks through the media. The much touted globalization was mainly interpreted as the unquestionable right of grand capital to move freely with no respect for borders, and at a much higher rate than the mobility of workers from different societies. Any opposition to that state of affairs was discarded as a remnant of a way of thinking and acting that failed and that were supposedly condemned by history.

This ideology of un-control masked grave tendencies in global political economy (AKA geopolitics), with serious social and political consequences. I will review these tendencies and consequences in the upcoming lines. I shall be brief.

The main geopolitical consequence has been the shift of productive economy of real goods from West to East. The great Asian countries’ economic growth has been stunning. It is based on transferring technology and the exploitation of cheap labor. It is a primitive accumulation process that West encountered two hundred years ago. As the West once did, the East will now go through new stages of development, individual and collective social mobility, and the modernization of society. The greater the development, the greater the weight it carries on global politics, including military power. Meanwhile, in the West, deindustrialization grew and the importance of the service sector carries increased. The so called postindustrial economy, promoted as a future of great wellbeing, actually camouflages a very different –and in many ways regrettable- social and economic reality: greater inequality (the Gini coefficient has skyrocketed in all countries, but especially in the US), middle class compression, the downward mobility of workers, educational and infrastructural decadence. For twenty years the majority was fooled with the illusion of indebted consumption. By the end of this journey, the bubble burst and unveiled a majority exposed to the harshest of weathers: unsustainable mortgages, extremely expensive education, poor health coverage, and deteriorated services. Social descent, once manifest, leaves masses in a state of fear, anger and confusion. Those are the ingredients for symptomatic ideologies of authoritarian tendencies: in short, seeking scapegoats to dodge the painful truth with a massive deception. It happened in the thirties and it is happening again. It is true that history does not repeat itself, but it does rhyme.

Late capitalism is characterized by the predominance of the financial sector. This sector has a tendency towards ever greater concentration. It ‘produces’ nothing but formulas to extract profits from other sectors of the economy. Nowadays, in financial capitalisms’ late phase, ‘rent’ is a term that can be applied to every important sector in the economy. It is the thesis held by Joseph Stiglitz (Nobel Prize) in his latest book, entitled The price of inequality. Stiglitz argues that, under theoretical conditions of a perfectly free market, the tendency would be a decrease in the profit rate towards cero. With this thesis, Stiglitz very much approaches Marx’s prediction in Capital.

To postpone the tendency and avoid the collapse of the entire capitalist building, companies defend themselves by promoting an inverse tendency, towards monopoly, that allows them to manipulate prices and maintain an acceptable profit margin. They also use an entire arsenal of market asymmetries and imperfections (uneven information, manipulation of interest rates such as the LIBOR, insider trading, etc.). Sociological polls show that nowadays the culture of Wall Street and the London City embraces trickery and deception as indispensable elements in economic operators’ success. In the foundations of all these ‘tricks’ there is the rise of concentration and inequality.

This situation, in turn, generates instability and crisis, with the consequence of a global financial crisis. When debtors and victims of the financial system exhaust their resources and go bankrupt, their bankruptcy can promptly be transmitted to banks, insurance companies, and investment funds. In this case, the financial sector resorts to arguing that if it sinks, it would drag the whole economy with it (‘we are too big to fail’). Therefore, it turns to the State, meaning to contributors’ funds, to the State rescuing it with currency emission, capital injection and direct public aid. In short, those who hoarded profits through rent dedicate themselves, in extremis, to the socialization of their losses. At that time, the financial sector’s parasitic nature reveals itself-just as the king in the fable- naked. Late capitalism, which vilifies the State so much ideologically, has to resort precisely to it in case of bailout. To that end it allocates its agents in State’s institutions. That is why the great John Kenneth Galbraith held that in countries such as the United States, the only acceptable ‘socialism’ is the socialism for the wealthy.

Given this grave and regrettable situation, economic reasoning leads us to conclude that highly concentrated and profit oriented sectors in the economy should -in the name of a healthier and more viable capitalism- be decentralized through regulation and nationalization. The banking sector, particularly, has become rapacious and has, in many cases, captured the State. The rational solution would be its straightforward nationalization as a public service in favor of small and medium sized companies and other productive sectors of the economy. But, how to reach serious politics from a State ‘captured’ by the very groups that should be regulated? The answer is clear: it can only be accomplished through awareness and democratic mobilization. Late capitalism (financial and profit oriented) seeks to frighten us with the boogieman of a system collapse if we do not aid them (as contributors) and with the specter of class struggle. In facing such scare tactics the answer should be clear and decisive: let us not fear this system’s collapse, and- yes; our society needs a new healthy dose of class struggle. Conflict is the spice of life. Without social conflict there would only be ‘systemic crises’ and never a better society.

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