The capitalist economic system is an extremely mixed bag. It has, on the one hand, fostered prodigious economic growth and stunning technological innovation. In 1950, life expectancy on planet Earth was 48 years. Today, a newborn infant can expect to live over 71 years. The human population of our planet has increased by 40 percent since 1950, but the number of people living in dire poverty has been cut in half.
On the other hand, capitalism is a turbulent and divisive economic system. It induces extreme inequality both within and between nations, causes periodic economic crises, and generates cancerous forms of growth that now endanger the environment of our planet.
All forms of capitalism feature private ownership of the means of production, energetic pursuit of profit and expanding commodity markets. But within this general framework, many different types of capitalism can exist. Economic crises often change the rules by which the system operates and create new varieties of capitalism. Modern capitalism has an oligopolistic structure: a few giant corporations control most industries. It also has endemic tension between two tendencies within the capitalist class: (a) the entrepreneur-production tendency, which seeks capital accumulation and increased corporate power, and (b) the financial-rentier tendency, the primary goal of which is enriching the owners of capital.
United States capitalism experienced major economic crises in the 1890s (collapse of competitive capitalism), the 1930s (the Great Depression), the 1970s (rampant stagflation), and 2007-12 (the Great Recession). The 1890s crisis was instigated by cutthroat competition which decimated the profit rate. The crisis unleashed a wave of corporate consolidation, which was funded by large banks. It also fostered the rise of a managerial class distinct from the owners of capital. Between the 1890s and the Great Depression, U.S. capitalism was dominated by finance capital, which controlled corporations as well as the emerging managerial class. This economic system was called finance capitalism.
The Great Depression of the 1930s was caused by a combination of financial chaos, banking blunders and insufficient demand. This severe and prolonged crisis instigated a regulated form of capitalism with greater managerial autonomy and substantial state intervention on behalf of full employment and some social welfare. Trade and capital mobility were tightly controlled. Corporate managers in alliance with the military establishment dominated regulated capitalism, which was supported by the politically organized sector of the working class. In its heyday, the system generated strong capital accumulation and a stable income distribution. It is sometimes called "the golden age of capitalism."
The capitalist crisis of the 1970s was triggered by declining profits and rising inflation. This "stagflation" was caused by revitalized competition from Europe and Japan, escalating oil prices, rising labor costs and the social turmoil emerging from the Vietnam War. The stagflation crisis induced a political offensive by finance capital eliminating many forms of regulation, curtailing government economic intervention, removing controls on the export of capital, slashing taxation of the rich, and redirecting macroeconomic policy towards price stability rather than full employment. The revised economic system has been named neo-liberal capitalism but might better be called globalized finance capitalism.
The Great Recession of 2007-2012 was caused by the stagnant income and growing indebtedness of the lower 80 percent, proliferation of risky securities (derivatives), unregulated finance, slow capital accumulation, and macroeconomic policy rendered ineffective by globalization. What kind of capitalism will come next remains unclear. It could be neo-liberalism redux, or (more optimistically) it could be something like Scandinavian social democracy. Nor is it clear when the next economic crisis will break out. But given the turbulent nature of capitalism, it is virtually certain that there will be one.
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