Why it is Not the Crisis of Capitalism
Branko Milanovic on why the 'crisis of capitalism' is really about its own rapid expansion.
There has recently been an avalanche of articles and books about the ¨crisis of capitalism” predicting its demise or depassement. For those old enough to remember the 1990s, there is a strange similarity with the then literature arguing that the Hegelian end of history has arrived. The latter literature was proven wrong. The former, I believe, is factually wrong and misdiagnoses the problem.
The facts show not the crisis, but on the contrary, the greatest strength of capitalism ever, both in terms of its geographical span and the expansion to the areas (like leisure time, or social media) where it has created entirely new markets and commodified things that historically were never objects of transaction.
Geographically, capitalism is now the dominant (or even the only) mode of production all over the world whether in Sweden where the private sector employs more than 70% the labor force, the United States where it employs 85% or in China where the (capitalistically-organized) private sector produces 80% of the value added. This was obviously not the case before the fall of communism in Eastern Europe and Russia, nor before China embarked on what is euphemistically called “transformation” but was in reality replacement of socialism by capitalist relations of productions.
In addition, thanks to globalization and technological revolutions, a number od new, hitherto non-existent markets have been created: a huge market for personal data, rental markets for own cars and homes (neither of which was capital until Uber, Lyft, Airbnb etc. were created), market for housing of self-employed individuals (which did not exist before WeWork) and a number of other markets such as those for taking care of the elderly, of children, or pets, market for cooking and delivery of food, market for shopping chores etc.
The social importance of these new markets is that they create new capital, and by placing a price on things that had none before transform mere goods (use-value) into commodities (exchange value). This capitalist expansion is not fundamentally different from the expansion of capitalism in the 18th and 19th century Europe, the one discussed both by Adam Smith and Karl Marx. Once new markets are created, there is a shadow value placed on all these goods or activities. This does not mean that we would all immediately run to rent our homes or drive our cars as taxis, but it means that we are aware of the financial loss that we make by not doing so. For many of us, once the price is right (whether because our circumstances change or the relative price increases), we shall join the new markets and thus reinforce them.
These new markets are fragmented, in the sense that they seldom requite a sustained full-day of work. Thus commodification goes together with gig economy. In a gig economy we are both suppliers of services (we can deliver pizza in the afternoons), and purchasers of many services that used to be non-monetized (the already mentioned: cleaning, cooking, nursing). This in turn makes it possible for individuals to satisfy all their needs on the market and in the longer term raises big issues such as the usefulness and survival of the family.
But if capitalism has spread so much in all directions, why do we speak of its crisis? Because the malaise which is limited to rich Western countries is supposed to afflict the entire world. But this is not the case. And the reason why this is not the case is because the Western malaise is the product of uneven distribution of the gains from globalization, an outcome not dissimilar to what happened in the 19th century globalization when the gains were however disproportionally reaped by the Europeans.
When this new bout of globalization began, it was politically “sold” in the West, especially as it came on the heels of “the end of history”, on the premise that it will benefit disproportionately rich countries and their populations. The outcome was the opposite. It benefited especially Asia, populous countries like China, India, Vietnam, Indonesia. It is the gap between the expectations entertained by the Western middle classes and their low income growth, as well as their slide in the global income position, that fuels dissatisfaction with globalization. This is wrongly diagnosed as dissatisfaction with capitalism.
There is also another issue. The expansion of market-like approach to societies in all (or almost all) of their activities, which is indeed a feature of advanced capitalism, has also transformed politics into a business activity. In principle, politics, no more than our leisure time, was not regarded as an area of market transaction. But both have become so. This has made politics more corrupt. It is now considered like any other activity, where even if one does not engage in explicit corruption during his political tenure, one uses the connections and knowledge acquired in politics to make money afterwards. That type of commodification has created widespread cynicism and disenchantment with mainstream politics and politicians.
Thus the crisis is not of capitalism per se, but is the crisis brought about by the uneven effects of globalization and by capitalist expansion to the areas that were traditionally not considered apt for commercialization. In other words, capitalism has become too powerful and has in some cases come into collision with strongly held beliefs. It will either continue with its conquest of more, yet non-commercialized, spheres, or it would have to be controlled and its ”field of action” reduced to what it used to be.
 World Bank data, quoted in Capitalism, Alone, Chapter 3.
This first appeared on Branko's blog and was reposted with permission.
Image: Ian D. Keating via Flickr (CC BY 2.0)