Inequality is on the rise, and wages are nearly stagnant. This all came about after the fall in corporate rate of profits in 1970. After the golden age of capitalism, often referred to as embedded liberalism or controlled capitalism. Whereby capitalist engineered a new age of free market capitalism by manufacturing consent. This writing will not be talking about neoliberalism nor how consent was engineered (David Harvey did a comprehensive survey on that) but will talk about an inner contradiction of capitalism.
Productivity and real GDP per capita have been on the rise. At the same time, wealth concentration is reaching heights last seen during the roaring twenties, and wages are almost stagnant. The source of productivity in an economy is producing products. For productivity to be profitable, it requires demand. People constitute a significant amount of demand in an economy. However, how could economic growth be possible if incomes has been nearly stagnant? On top of that standard of living has remained the same.
The answer is debt, as financial times calls it, capitalism dirty little secret. The only way that allowed people to keep their standard of living in some places even increase and allow capitalists to keep the growth of rates of profits is debt. The credit market of households lies at 16.64 trillion dollars (2020), and bank regulation is at an all-time low. This is unsustainable and defies any intuitive understanding of economics.
This goal of economist of having a 3% economic growth is unsustainable and never will be, especially with capitalist persistence of increasing rates of profits to the point of reducing household wealths (taking into account debt) and artificially stimulating demand through financial innovation. Furthermore, their persistence of reducing labour cost by increasing automation, not paying taxes and holding minimum wage through lobbying is in itself the most short term thinking ever heard of. Production requires demand if people are out of work. There is no demand except if the welfare system funded by “corporation paying taxes” increases payouts or the other unsustainable road they chose to deregulate banks. Furthermore, minimum wages are vital to the survival of an economy as it constitutes a significant sum of demand yet their efforts to keep it low is naïve. This is the problem of free market capitalism short term profits is prioritised over long term growth. Another example is global warming. I will discuss the relationship between capitalism and the environment at a later date.
In conclusion, Capitalism un-controlled is a threat to social prosperity and, frankly, the existence of humans (global warming). As Marx stated, “The history of all hitherto existing society is the history of class struggles,” and now is no exception. We live in an age whereby short-term profits are prioritised over sustainable existence and people; it’s a class struggle between capitalist and the many.
