Capitalist Heat Death

“What do today’s fragile recoveries, amidst a broader slow-motion meltdown of markets, indicate about the historical viability of capitalism?” posits Balakrishnan. “Looked at in a long term historical perspective, the latest round of global turbulence might open up new perspectives on the outer boundaries of development as outlined by Dave Harvey in his striking title The Limits of Capital. A capitalist system, in a certain sense, is destined to eventually hit those outer boundaries of development.”

We have been living in a period where that prospect is inconceivable to most. We think that the capitalist system and socioeconomic world that we live in could indefinitely perpetuate itself, for better or worse. Some people think that’s good, some people think that’s bad. But the crisis we now find ourselves in is no ordinary crisis after which the system will rebound, reset and be back on track again. Something else is happening here.

After a quarter century of ever-greater dependency on debt and speculation, both the developed and the developing worlds are entering into a new period in which the constant problems of deflating bubbles, extractive monetary policies and so-called “quantitative easing” have converged to greatly diminish the capacity of our society for further development along the classical capitalist path of technological innovation. The growth of productive forces that expand income, which allows a society to move forward on the basis of investment and employment, has stagnated. The vision of capitalism, as exposited by Karl Marx, was far more dynamic than that of Adam Smith or David Ricardo, but at the heart of this conception was the idea that capitalism was dynamic because it was prone to crisis.

“When I speak of the outer boundaries of capitalist development, I’m not talking about a situation in which capitalism will, in some imminent future, come unraveled and be replaced by some other socioeconomic system,” says Balakrishnan. “I’m talking about the end of that pattern of development. There has been an assumption, even among reformists, that capitalism was going to continue in this dynamic development, and that you could just reform it and redistribute the wealth within that framework. One of the reasons we’re undergoing an unsettling political transformation is that the fundamental assumption within the public sphere about the reformability of the capitalist system is coming undone. And yet, we do not have any ready and more radical alternative. So we’re caught, in a certain sense, in a historical structural impasse.”

The “future” is often conceived in terms of the arrival of a new dynamic face of capitalism: new technologies powering the rise of new regional patterns of development, often at the expense of the wrenching decline of older sectors. Balakrishnan proposes that we are in an era of socioeconomic shakeout and contraction that began in the 1970s, compounded by a drift in the more economically advanced regions of the world towards the stagnation of capitalism. The advent of this so-called secular stagnation points to a more uncertain future, beyond capitalism.

“If you think about the irony of our situation, it wasn’t too long ago that we saw the collapse of the Soviet Union and its clients,” says Balakrishnan. “In the aftermath of that, it was thought that capitalism—the ‘free market’ system—had an unopposed path of almost limitless expansion before it, and this was going to define the era in which we live: The era of globalization, as it was called. So, it’s very unsettling, not just for progressives but really going all the way to the top of the system and its elites, to see a situation in which we do not even know what’s going to happen in the next few years.

“We no longer have a road map for the future in terms of the evolution of the system,” he continues. “Society seems to be plagued by an unexpectedly high level of turbulence and an inability to resume the classical path of growth and expansion which people in wealthy societies have come to expect. And I believe that there will be far-reaching political and ideological consequences as a result of the failure of the capitalist system to deliver, so to speak, the goods: jobs, a rising economy, the possibility for new opportunities for young people.”

It is important to understand that the current eruptions of instability in the world economy, now setting off tremors in the political sphere as well, did not come after a period of dynamic expansion, but rather after a decades-long downturn in the advanced capitalist zone. Today’s halting recovery, a blip in the protracted swamp, is the latest manifestation of a long deceleration in growth rates in advanced economies.

“Ultimately, the slowdown is the result of a reduction in the rate of return on capital investment in the advanced economies that never fully recovered after the 1970s—that heyday of the capitalist system after World War II, at least in the West,” says Balakrishnan. This was a period in which living standards steadily rose; in which one could expect one’s children to have a standard of living almost twice as high as one’s own. This is no longer the world we live in.

“Why did that happen?” posits Balakrishnan. “If we think of the capitalist system as being such a dynamic system—one that’s capable of delivering ever greater output, even if it’s unequally distributed—why is it the case that we have not witnessed, for 30 or so years, a rise in the real wage? Why is it the case that, if we’re such a productive economy, we work just the same amount of time as we did in the 1950s or ’60s?”

After all, in the 19th century the average worker may have toiled 12 or more hours a day, every day except perhaps Sunday. After WWII, that went down to eight hours and became a generalized pattern. Since the ’70s, the trend has reversed, with people working longer hours and with fewer benefits.

“I recall a time, when I was young, in which most middle class wives stayed at home, and yet families were able to buy a house,” says Balakrishnan. “It’s not something to idealize as a kind of bygone world that we should try to return to—this is the stuff of conservative nostalgia. But it speaks to why people are, in a kind of reactionary way, revolting against the trend line of capitalist development; why they look back at that particular period and want it to return. As a result, all kinds of morbid symptoms erupt in our political and cultural world as people are incapable of comprehending what is going on. They blame immigrants, they look to the past, they fall back on religious fundamentalism.”

These are signs of the times for a society in limbo. Capitalism is faltering, and yet there is no subjective political framework for society to comprehend and adapt to the situation.

Room For Ideologues

Amid the void of a societal guiding light, the nostalgic idea that President Trump can “make America great again” on the basis of protectionism has captivated large swaths of the American voting public. But this is nothing more than a phantasm of reassurance. The global pool of labor has increased so rapidly that it is now dragging down the wage level all over the world.

“A certain element of the elite in society have been playing this game for a long time,” says Balakrishnan. “They say to a certain element of the white working class: ‘We’re trying to do the best for you. What you really want isn’t higher wages or unions or healthcare or anything like that. What you really want is to be protected from the government, which is trying to take away your guns, trying to take away your God.’ And they have, for a while, been successful in deflecting demands for social change and progress, by playing that game.”

The system that is so good at tending to the interests of the wealthy and powerful has been propped up through tapping into the passions and emotions of its base. After a quarter of a century stoking the flames, the elites that have profited from this arrangement are witnessing an unpredictable backlash in the form of Donald Trump’s ascendance to the White House. The possibility of domestic and international instability stemming from the actions of the new administration is inflicting severe trepidation. But don’t bother looking for responsible parties among the elite to intercede.

“The policies—both Democrat and Republican—that have generated this response have accelerated and exacerbated the trend line toward instability,” Balakrishnan explains. The call to deport millions of immigrants is the most fascist aspect of the whole Trump thing. But Obama deported more Mexicans and Central Americans than all the presidents before him. Democrats will focus on Trump, but they didn’t do anything when it happened under Obama. Now they’ll focus on wiretapping and drone-bombing and all the craziness of our wars and spying, but when it was happening under Obama, they didn’t say anything. They allowed it to happen. And now, Trump has come to power and he has all these capacities and powers to spy, to drop bombs and to do all these things everywhere, and it was the Obama liberals that built up that capacity. There was some expectation that they would roll back some of the policies that had been built up under Bush. They didn’t do that. They pushed it forward, and now we’re all paying the price.

“The fallout is peoples’ lives sinking, or the perception that their way of life is disappearing,” he continues. “We have to have a way to open up an outlet for backlashes on the progressive side. There’s only an outlet now for this kind of rage and confused hostility to things gone wrong. If you try to neutralize that by just clinging to the existing status quo, no one is going to believe you. We need to tap into the other segments of society as well as angry white workers. We must combine the ever-larger grievances of the worst-off and most politically disenfranchised parts of our population: the Latino workforce; the Black ghetto; yes, the white worker as well; the millennial. Bernie Sanders, Black Lives Matter; the hammer has really come down on Latinos.

The potential is there. If all these groups, including the white worker, can be appealed to on a different basis, the whole political balance of power could capsize. What we need is the political struggle; the coalition between these different forces. “When that happens, the whole landscape of American politics is going to change,” says Balakrishnan.

The thing to keep in mind is the underlying story and evolution of the capitalist system and the way in which the political system exacerbated the trend line and led to these frightening results. And it’s not just happening in the United States. Even more ominous, it’s a pattern that is unfolding in the wider western political world.

“So, there we are. We need to get off whatever train we are on. If we’re progressives, the idea that supporting the Wall Street wing of the Democratic party and fielding someone because she is seemingly more sane and competent than the reactionaries isn’t getting us anywhere,” says Balakrishnan. “People want safety and they want to avoid crazy, but we’re getting crazy because we’re clinging to a status quo that’s hated by more and more people on both sides of the political spectrum.

“It’s not working, for more and more people. Latinos and Blacks still might vote for these policies, these politicians, but we shouldn’t take comfort in that fact,” he continues. “They’re being screwed over by these policies and politicians and sooner or later they’ll have had enough and there won’t be enough of them at the polls to stave off the trend in the other direction.”

The huge spike in abstention during the 2016 election suggests that’s already happened to some degree. Low voter turnout in key states was one of the conditions of Trump’s victory. Blacks and millennials stayed away in big numbers. Both groups strongly identified with Obama in 2008, but did the Obama Administration deliver the goods for Black America, for inner city America, for young America?

“In a way, Obama was very successful in neutralizing domestic political opposition to the fallout of the financial crisis and the anti-war movement, both of which had begun building up under the Bush Administration,” says Balakrishnan. “He did what a president is supposed to do, which is to run the ship of the American state and neutralize challenges to the existing order. In that respect, he was a good president. That’s what he was supposed to do. Trump is not going to be a good president. His reckless narcissism is more likely to cause blowback and damage the interests of the ruling elite of which he is a part.”

Debt Sentence

In the '90s, it seemed plausible that post-war production and information technology would function as the driving forces of the transition to a new economy: one more productive than anything that had come before it. Strangely, rather than leading to any new economy in the productive base, it has become apparent that the innovations of this period of capitalism have powered very significant transformations in the world of social communication. We see this all around us, but without any impact on the standard of living comparable to earlier eras of technological change. So why has this happened? It’s not as though there have been no new technologies. In fact, there have been a plethora of technologies that could form the basis of a new age of wealth. So why aren’t they materializing on a capitalist basis?

“The post-industrial capitalism we’ve entered into has not been able to reduce the cost of social reproduction because of an almost insurmountable technological stagnation in the services that form the core of our whole life: education and healthcare,” says Balakrishnan. “Increasingly, more people are employed in service sectors of the economy, while fewer people are employed in industrial production.”

This irreversible trend is not just a sign of the maturing of our economies in the same way that there was once a period where 85 percent of people had to work in agriculture for society to scrape off enough surplus to support a tiny percentage of people who lived off of the work of the rest. We now live in a society in which only 2 percent of people are involved in food production. The same thing is happening in manufacturing, though that drop has been slowed by moving production to low-wage regions.

“If President Trump slaps charges on companies importing goods from China in an effort to bring jobs back to the United States, all that would happen is these jobs would rapidly evaporate as workers are replaced by robots,” says Balakrishnan. “This is simply one of two scenarios, neither of which look good for the people who expected Mr. Trump to make America great again by reflating the industrial basis of the economy.”

Advanced capitalism would get a new lease on life if it found a way to significantly decrease the cost of health, education and age care, without drastically reducing the level of employees, reproducing the pattern of technological development which expanded output by 100-fold in these sectors during the post-war era. But there’s simply no way of doing that with an economy in which more and more of the labor force is employed in the service sector.

“You can make services, you can privatize them, you can try to cut back by going on the cheap, and all kinds of schemes have been proposed to squeeze out a profit, but it simply will not be able to ignite the pattern of development which has been the basis of the success of the capitalist system over the two centuries of its existence,” says Balakrishnan.

“In this context of stagnation, the reason why we’re seeing a regression toward inequality is because, in order to recuperate profits at the top and accumulate capital, elites have to take a larger and larger share of a pie that continues to slow in growth,” explains Balakrishnan. “And because they’re taking a larger and larger share of this pie, who will they sell their products to? Who is going to buy their products if they keep wages down; if they don’t pay taxes in the sort of way that they used to? At that point, the only way to continue the dynamic is if people, individuals, households and whole states go ever further into debt.”

The sustainability of this path of development is not grounded in the actual expansion of income growth within productive forces and, therefore, requires debt and unsustainable bouts of speculation which, eventually, come crashing down around us, just as they did in 2008.

Darkest Before the Dawn

Technological innovation, which has always powered the capitalist system in the past and accounted for its distinctive dynamic component, is no longer materializing. In the the last 30 years, in the absence of economically meaningful innovation, the direction of growth has shifted to debt speculation. In order to find a way out of our situation, we must first recognize the actual factors that got us here. We must reject the view that the causes of our stagnation are technological and explain it in terms of the socioeconomic structure of capitalism; we must acknowledge the requirement, within this system, that new innovation will only happen when it is profitable for capitalists.

“One path toward meaningful change is through the emergence of new forms of international political struggle,” says Balakrishnan. “We will have to organize on the basis of local issues and justice struggles to improve the conditions of working people and those that are worst off in our society. And that’s not a small minority. I’m not talking about charity here. I’m talking about the fact that—even in American society which is, by comparison, a highly affluent one—more and more people are falling through the cracks.”

The capitalist system is incapable of returning to a world in which workers are deprived of fundamental rights—the fruit of the advance of productive forces that has taken place up until this point, which has resulted in the achievement of a certain level of education, a certain level of healthcare, a certain state of development.

“Antonio Gramsci, the great Italian Marxist, referred to a pessimism of the intellect. This means a clear-eyed view of our historical situation, without the consolations of wishful thinking,” relates Balakrishnan. “But it can also be seen as a counter to certain dystopian notions of an endless extension of current trends of inequality. The notion, for instance, that in 20 years we’re going to have three times the level of inequality that we presently have. I disagree. Or some people speak of a future in which all workers will be replaced by robots, and yet somehow this would still be a capitalist system. I disagree.

“Am I invoking ideas of the decline and fall of other civilizations? Contemporaries of earlier phases of capitalist society could contemplate its ultimate fate in terms of classical narratives of decline and fall. But in this late or postmodern phase we’re in, such a precedence has become increasingly unpersuasive,” he continues. “We lack any relevant historical analogies of how the decline of capitalism might unfold. The contours and transitional forms of its descent would likely bear little resemblance to the ways in which older, agrarian civilizations collapsed or changed into some other form of life.”

These dystopian ideas of complete automation in which human workers would be made completely irrelevant—or see spiraling levels of inequality, two or three times higher than the ones we have now; these are not the main problems confronting our system and our future. These dystopias contain or conceal a certain wishful thinking about the continuity of the present into the future, offering the reassurances of a known quantity.

“More than ever, the future is unknown,” says Balakrishnan. “It will be made or unmade by collective political forces that undermine our ability, to a certain extent, to extrapolate. Nonetheless, this unknown future will unfold within certain structural parameters of the decline of capitalism, which will either give rise to a new, higher form of civilization, or regress back to various unprecedented forms of barbarism. That is, more or less, an encapsulation of the historical situation that we’re in, and is key to explaining the current socioeconomic trends in the United States, as well as in the wider Western world.”

Only one thing is certain: we cannot go backwards. And, therefore, we must forge ahead together.