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Are we in a Post Capitalist World?

by ARGeezer Thu May 6th, 2021 at 04:29:04 PM EST

Yanis Varoufakis has an interesting take on the current situation in Europe and the USA. He was the virtual keynote speaker at a conference in Israel apparently sponsored by the Israeli Labor Party. He asserts that, since 2008, we have been in a Post Capitalist environment.

Our situation is Post Capitalist as capitalism has been disconnected from the ability of corporations to make profits by making things or by providing non-financial services. Much of this has to do with financialization. In the USA and UK manufacturing ceased to be profitable and was largely 'offshored' under the guise of 'neoliberalism' which was neither liberal nor new. Since the '80s in the USA and UK profit sources came to be financial firms.

General Motors, by 2008, was a financial services firm that made cars on the side, while the profits came from General Motors Acceptance Corporation. I would add General Electric to that category, as by the '90s its profits came from the Japan Carry Trade - borrowing Yen for free in Japan, converting them to US$ and 'investing' those dollars for profit at a positive interest rate in the USA.

But in 2008 this all collapsed and the banks, along with other financial firms, were bankrupt and totally dependent on free money from the Federal Reserve or the Bank of England, which came to the rescue of the financial sectors, with the Federal Reserve also supplying generous swaps of US$ to foreign Central Banks. But what to do with this free money? Central Banks could only supply that money to credit worthy borrowers, of which there were few, as citizens did not have accounts at the Central Banks.

The answer was to give the money to large corporations. They could be counted on to pay the money back and many of them had huge cash reserves anyway. But the corporations did not see profitable investments available in the economy. In Europe the ECB went to negative interest rates, effectively paying the corporations to take the money. The not so ingenious solution of the corporations was to use the money to buy and retire shares of their own corporations, thus driving the stock bubble we now have.

To Varoufakis this was no longer capitalism, which is why he calls the situation Post Capitalist. Then he points to the massive market failure constituted by the inability of Capitalism to make the investments necessary to save the climate. So he argues for a Green New Deal financed by Green Keynesianism.

But Varoufakis also notes that such Keynesian efforts always meet with push back from the business sector. So he proposes a new version of Capitalism, where each worker has one non-transferable voting share in the corporation for which he works and the direction of the corporations are set by votes of the workers. This reminds one of Lenin's 'All Power To The Soviets' - at least so long as they followed the direction of the 'vanguard'.

Well, something clearly needs to change in the organization of our political economy. And that something needs to address the massive wealth inequality and the inability/unwillingness of our current Capitalist system to invest in saving the climate and providing future generations with a livable world.

I don't understand the term .. IMO since the Year 2000 I would say Run-away Capitalism. Growth extreme wealth for 0.1% and inequality in society where too many fall by the wayside, creates instability and the call for state security. Ideal for feeding ego's of the few and thriving narcissistic characters. Women and minority rights will be offered on the altar of American style pure capitalism. Supremacy pur sang. Incentive to save the planet is not on the cards. A fictional financial world where the gold standard ... ehh US dollar has been replaced by bitcoin in the Cloud. Purses on the hard disc. 🥺
by Oui on Fri May 7th, 2021 at 06:39:34 AM EST
I a way, yes. The accumulation of capital through profit is apparently no longer necessary, but the right connections in banks that can create billions are necessary. I have suspected for some time that the investors that props up Uber and other so called unicorns are the last step in a chain that starts with a banks creating loans.

In another way, no. I suspect that if on goes back one can find a lot of these credit-created companies and I suspect that their portion has always been pretty large. If I recall correctly the German railroads were built to a large extent by companies that crashed and were taken over by banks. Those railroads were not financed by slowly accumulating profits, they were financed by credit. I don't know of any research to quantify how these poritons changed - not least because credit created companies has been seen as either an aberation (bubbles) or as pre-extending future profits, rather then a thing of their own.

But it sure is more naked now.

I like Varoufakis suggestion and would like to add that as companies grow they should be forced to take more stake holders on board.

Also 'All Power To The Soviets' was according to Goldman the anarchists rallying cry, that the Bolsheviks cynically co-opted, and then they undermined the local soviets (councils). The bakers soviets were apparently the last hold outs, working independently into the early 20ies, because otherwise the bakers striked, which meant no bread.

by fjallstrom on Fri May 7th, 2021 at 10:31:00 AM EST
The American railroad industry in the late 1800s suffered an almost continuous string of bankruptcies, reorganizations, and mergers. Even the mighty Union Pacific went broke a couple of times. Many US railroads have a history of name changes between "xx Railroad" and "xx Railway," for example.

The constant factors were the government subsidies in terms of land, financial, and legal protection, the massive flow of money into the pockets of the executives, the massive losses of the investors, and the lousy service provided to the customers.

by asdf on Sat May 8th, 2021 at 01:36:41 AM EST
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Lincoln was making money as a lawyer from railroads well before he went into politics. It was highly convenient that the Civil War, the gold and silver of the west and the desire to add California as a state emerged when they did. I don't know if it even occurred to Lincoln that fewer railroads might have avoided the grotesque financial and operational problems that emerged, let alone the financial disasters that resulted from frequent railroad bankruptcies. And Lincoln did not live to see the worst of the worst. But the railroads were allowed to set the template for other large corporations when dealing with the government.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 8th, 2021 at 01:46:20 AM EST
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The above is well set out in Richard White's monumental 'Railroaded - The Trans-continentals and the Making of Modern America' Norton.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 8th, 2021 at 01:50:01 AM EST
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I'm not following YV here.  Capitalism has always been about access to, generation of, and manipulation of capital.  Everything else is just a method of implementation.  The methods have changed, but capitalism is still capitalism.  We may now be in Late Stage, since it seems the entire structure is eating itself to continue, but it is still capitalism.
by rifek on Sun May 16th, 2021 at 08:03:20 PM EST
Prior to the financialzation of the US economy, beginning in the '70s, all forms of capitalism had focused on making profits on manufacturing or delivery of services such as medical care, personal care, legal and accounting services, etc. The focus now is on financial manipulation of representations of wealth, with delivery of services or products as a secondary factor. E.g. General Electric and General Motors. Now large corporations show PROFITS from financial manipulation, show LOSSES from delivery of products and services and are dependent on preferential access to cheap or free government money to show profits at all. That is an unprecedented and fundamental shift from any previous mode of operation. So I will go with Yanis.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun May 16th, 2021 at 08:39:02 PM EST
[ Parent ]
The rentier aspects of capitalism have always been there and were typically the ultimate goal of capitalists.  Scrooge took advantage of the working class not being able to live on the wages the owners paid them to make usurious loans (rather lie pay-day lenders today) and then play the market.  The owners of Union Pacific used Credit Mobilier to bleed UP dry for their own benefit.  The 1929 crash was the result of uncontrolled securitization of the US economy (And BTW, it also resulted in a massive asset transfer from the working and middle classes to the capitalist class, as has every crash we've ever had.  It isn't a new phenomenon.  The reason the capitalists were making noises about a coup against FDR was because his New Deal was interfering with their expected rake.  For the Ueberklass, crashes aren't a bug, they're a feature.).  Much of the control feature of colonialism, both de jure and de facto, has been through financial manipulation.  Think of how the UK gained control of the Suez, or how the West, through the IMF, has kept just about every place else tied to the whipping post.

Once upon a time, it was believed capital needed generated by and backed by hard assets, such as raw materials and manufacturing.  About a half-century ago the Ueberklass figured out this was a load of Quatsch and that they could leave the nasty business of creating and operating hard assets to the schmucks while they took the real rake through financing (This is why they have their lackeys in the media and academe constantly attack MMT.  Knowledge is power, and ignorance in everyone else is both useful and essential for those with knowledge and power.).  What had been a side line (GM created GMAC in 1919, and GE had its own finance structures.) became the main event as manufacturing was shipped to what was once known as the Third World, and the West pushed securities and currency around.  As I said in my first post, the whole thing is now unsurprisingly eating itself, but with Global Climate Change looming, it may not get a chance to finish its meal.

by rifek on Mon May 17th, 2021 at 05:10:01 AM EST
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