Capitalist failure is not obvious to most Americans, thanks to the work of capitalist fanatics in extolling its virtues. These true believers are not so much the bankers, and the corporate CEOs raking in the dough; rather the credit for selling the public on a failing system goes to their allies in the press, politics and the academy.
The news that President Barack Obama is moving to regulate banking and bonuses paid to bankers will be warmly welcomed by most Americans, despite opposition from the moneymen. However, the problems with American capitalism go well beyond its financial captains, and their plunder.
New regulation is not going to bring American capitalism back to health.
Ironically, the severity of the recent financial crisis has helped obscured the underlying problems of the American economy. Worse, these have been misidentified by economists as cyclical in nature, a downturn that can be overcome by sufficient stimulus. Prominent critics of the Obama administration such as Joseph Stiglitz and Paul Krugman complain that government fiscal policy needs to provide more stimulus, while capitalist cheerleaders claim that recovery is underway, and that no new spending is needed.
What ails American capitalism goes beyond a fall in private spending that can be corrected by increased public outlays, and deficits, because the U.S. economy is suffering from more than a cyclical downturn caused by a banking crisis. U.S. capitalism is generating structural weaknesses in the U.S. economy. These failings are deep seated, and are not going to be fixed by stimulus, or regulation.
After years of over-consuming its natural resources, the U.S. economy is running out of profitable but environmentally destructive outlets for investment such as production of domestic petroleum. Water shortages loom over agriculture. Much of the economy is driven by military spending which contributes little to improve daily lives of Americans, and diverts public money away from useful purposes. Most importantly, making structural changes takes planning and time, and in the U.S. economy there is no planning mechanism other than corporate decision-making geared to a quarterly results of profit, and (most recently) loss.
American enterprises have enjoyed success, but the proceeds have been reaped by only a small percentage of Americans, the top one per cent of the top one per cent of wealthy individuals as shown by income distribution specialist Thomas Piketty. According to market theory incomes are supposed to be distributed proportionately to the contribution made to the generation of income. This is clearly not the case under American capitalism. Social power exerted by the wealthy serves to cover the gross injustices of the reward system skewed to benefit just a few.
The seriousness of the U.S. economic situation is understood by some but the mindset of American opinion leaders is resolutely pro-capitalist. This leaves little space for alternatives to capitalist thinking in American politics.
Capitalist fanatics play an important role in Canadian politics as well, attacking the NDP for existing and intimidating the Liberals into supporting the rapid exploitation of the Alberta tar sands, despite the obvious environmental destruction this entails. Stephen Harper celebrates four years as prime minister thanks to the Liberal unwillingness to form a coalition with the NDP. Liberal backroom players take their lead from the same people who are running the U.S. economy into the ground.
A failing U.S. economy is not going to help bring prosperity to the U.S. or Canadian economies. But then for a capitalist fanatic, any economic problems can be fixed by more adherence to capitalism. It remains to be seen how long it will take before this unbalanced belief gets its comeuppance in public rejection of its adherents. Defeating Harper's government would be a good place to start.
Duncan Cameron writes from France.