Capitalism is an economic system in which a small social class owns and controls the productive facilities of society and uses these facilities to make profit. Capitalist systems have existed for about five centuries and can claim credit for the greatest surge of technological development and economic growth in human history. But capitalism also has severe problems, some of which will be addressed in this column next month (or see "The Rise and Fall of Neoliberal Capitalism" by David M. Kotz, Harvard University Press, 2015).
Capitalism is not a static system. It is constantly evolving and has had many distinct structures. Different forms of capitalism are often separated by an economic or political crisis motivating major institutional change. The form of capitalism existing in the United States (and elsewhere) from the Great Depression of the 1930s to the mid-1970s is often called regulated corporate capitalism. It featured a few giant corporations in most industries, but it also empowered the state to regulate relations between social classes and prevent economic downturns.
Regulated corporate capitalism experienced a serious profit crisis during the 1970s and was gradually replaced by a different type usually called neoliberal capitalism. This form of capitalism retains giant corporations but de-emphasizes or abandons most forms of state regulation. Neoliberal ideology claims that governments are inherently inefficient and consistently destroy individual freedom. Thus economic relations should be determined almost entirely by unrestricted market forces.
Under neoliberal capitalism, government management of aggregate demand — intended to prevent economic volatility — is largely eliminated. Concurrently, constraints are removed from finance capital so finance capitalists become richer and more powerful (a process called financialization). Social welfare programs are deeply slashed, while taxes on corporations and the wealthy are reduced. Public services become increasingly privatized, but environmental and job safety regulations get severely weakened.
Neoliberal capitalism also changes the nature of employment. Union membership and the associated job protections decline precipitously (under 10 percent of U.S. workers are currently in unions). Steady jobs at decent wages recede in favor of precarious employment at or near minimum wage. Meanwhile, the real buying power of the minimum wage declines steadily. The social and economic boundaries between the working and the middle classes gradually erode under neoliberal capitalism.
The neoliberal economic system accelerates the phenomenon of globalization, already well established under the prior regime of regulated corporate capitalism. It does so by enabling the transfer of goods and capital across national boundaries and by promoting corporate investment agreements like NAFTA (disguised as free trade deals).
Not every field of government activity is inconsistent with neoliberal ideology nor constrained by the neoliberal system. Both the U.S. prison system and the U.S. military establishment have expanded enormously under the aegis of neoliberalism. The prison system ultimately protects private property, while our bloated military establishment ensures the global hegemony of capital. But neoliberal capitalism is not immortal. Stay tuned for news about its recent crisis and possible demise.
The Rocky Mountain Peace and Justice Center's "Peace Train" runs every Friday in the Colorado Daily.