December 4, 2013
It's beyond ripe and starting to
smell. This recent form of capitalism is past its due date.
Not all versions have been so bad. The preceding "Golden Age of Capitalism"
started after World War II brought general prosperity to all. Its guru was John
Maynard Keynes who made stimulus spending an engine of growth. That cycle saw
the formation of unions, growth of wages, construction of public infrastructure,
improvements to social security and - - a novelty today - - reliable
governments. It ended with the stock market crash of 1973-74, followed by a
decade-long recession.
This round of capitalism has been called many things. Naomi Klein, the author of
The Shock Doctrine, calls it "disaster capitalism." She describes it from the
perspective of developing countries as characterized by war, torture, disaster,
and political upheaval. With a country in ruins, First World multinationals move
in and exploit the turmoil, take over services once controlled by government,
and sustain the systemic instability in order to profit from it.
Murray Dobbin of the Canadian Centre for Policy Alternatives calls it "savage
capitalism" or "extreme capitalism." The Chicago School economist Milton
Friedman is the guru. Unlike the Golden Age, this round is characterized by
decaying infrastructure, attacks on social security, stagnation of wages, and
governments in disrepute.
Its been golden for only a few. The middle class has been hard hit. A report
commissioned by Finance Minister Jim Flaherty revealed that after-tax income
increased an insignificant 0.2 per cent annually from 1976 to 2010. Savage
capitalism has not been kind to full-time workers who saw wages increase $2 a
year over decades.
|
Considering the increase in labour productivity
over this period, you would expect that workers would have received a bigger
slice of the pie. Productivity increased by 37 per cent. If labour had
received their fare share, median average wages would be $15,000 more
annually says Dobbin. So who reaped the rewards of productivity? The
capitalists, of course.
Ironically, the tenets of Keynes' Golden Age were invoked to save us all
from the excesses of Friedman's deregulation. However, instead of the
stimulus money going into job creation in building infrastructure and saving
homeowners from mortgage defaults, it went into the very pockets of
racketeers who caused the mess.
While some of the stink from savage capitalism is unique, it assumes the
classic features of all cycles. Capitalism always increases productivity by
reducing input costs, including labour, so that eventually there is a
surplus of goods that fewer people to buy because of stagnant wages. Less
consumption results in fewer jobs and inevitable downward spiral of
recession.
But this round is complicated by cheap Chinese goods and the growth of
credit to buy the goods. Canadian debt is perilously high. For every $100 of
income, Canadians owe $163. Money borrowed against home equity is 12 per
cent of our GDP (4 per cent in the U.S.).
How savage capitalism will end is anyone's guess. "Nothing in nature or
economies stays the same for long," warns Dobbin, "and these two factors
(cheap goods and cheap credit) can no longer save extreme capitalism from
its crisis."
David Charbonneau is the owner of Thompson Studio
He can be reached at
dcharbonneau13@shaw.ca
|