Ricochet is the best place on the internet to discuss the issues of the day, either through commenting on posts or writing your own for our active and dynamic community in a fully moderated environment. In addition, the Ricochet Audio Network offers over 50 original podcasts with new episodes released every day.
Time to Reset the Doomsday Clock of ‘Late Capitalism’
The famous Doomsday Clock — it’s a key visual motif in the Watchmen graphic novel and television miniseries — was created by Manhattan Project scientists as a metaphor to suggest how close mankind might be to global catastrophe, originally atomic war. And over the subsequent seven decades, it seems like we’ve typically been pretty close to disaster. The clock was set at seven minutes to midnight in 1947, and it’s averaged between five and six for more than 20 years. Midnight always looms.
Similarly, so does the end of capitalism. It’s always quite late, apparently. The sun is always setting. German economist Werner Sombart coined the phrase in the early 20th century, and European socialists popularized it during the Great Depression when it probably seemed about 30 seconds to midnight for capitalism. But things were darkest before the dawn. Capitalism survived, flourished, and spread across the globe. And even small doses generated near wondrous improvement.
Yet we remain stuck and suffering in late capitalism, according to progressives and socialists. And unlike with the Doomsday Clock, the end only approaches, never recedes. Here’s a handy definition from Annie Lowrey in The Atlantic: “‘Late capitalism,’ in its current usage, is a catchall phrase for the indignities and absurdities of our contemporary economy, with its yawning inequality and super-powered corporations and shrinking middle class.” So Jeff Bezos and that $375 “eco-friendly” silver straw from Tiffany’s, basically.
Still, a curious time to be resurrecting “late capitalism” versus, say, 2009, when economies were crashing, unemployment was soaring, and the entire global financial system was near collapse. An informative economic update from my AEI colleague Michael Strain in his Bloomberg column:
Only 35 U.S. workers out of every 1,000 are looking for jobs but unable to find them — the unemployment rate is lower than it has been in a half-century. The rate at which people in their prime working years hold jobs is higher than it has been in over a decade. (I noted in November that it had finally fully recovered from the Great Recession, despite much concern that it never would.) In 2009, there were over six unemployed workers for every job opening. Today, there are more job openings than there are unemployed workers.
Are the theorists of late-stage capitalism right to be extremely concerned about income inequality? The level of inequality is high, but this is an odd decade to bemoan its rise. According to the nonpartisan Congressional Budget Office, between 1979 and 2006 the rich-poor gap in income after taxes and government transfer payments increased by 27 percent. But from the beginning of the Great Recession, when criticism of capitalism became much more common, to 2016 (the last year data are available), inequality actually decreased by 7 percent. Or consider the ratio of weekly earnings between high- and low-wage workers. Between 2007 and 2019, this measure of the wage gap grew by only 1 percent.
What comes after late capitalism? Maybe it’s whatever they have in China right now. Call it state capitalism or predatory capitalism or socialism with Chinese characteristics. It’s a model that gives the state a strong leading role in managing the private sector. And the combo of China’s rise and ambitious future plans has so impressed some in the West that they are proposing their own version called “industrial policy.”
But the Chinese model should spur caution rather than spark aspiration. As The Economist recently noted: “There is evidence that China’s heavy-handed intervention is becoming increasingly ineffective. Total factor productivity growth in China in recent years has been a third of what it was before the 2008 global financial crisis. Productivity has also slowed in other countries, but the World Bank, in a recent book about Chinese innovation, notes that China’s slowdown has been unusually sharp.”
Maybe the Beijing planners haven’t figured out a sustainable successor to market capitalism. Maybe things here are better than you think. Maybe it’s time to push back the hands on the doomsday clock of capitalism. Maybe it’s not so late after all.
Published in Economics
It looks like our own central planners haven’t gotten the word that things are wonderful here either.
Janet Yellen promised us that the Federal Reserve would run off its $4 trillion dollar plus balance sheet in an automatic process that would be like “watching paint dry.” They got to a little under $4 trillion before reversing course last September and launching QE again (without calling it that), and they are back over $4 trillion. They’ve also been pumping hundreds of billions into the repo market to keep it afloat.
Oh, and their promise to normalize interest rates came to an abrupt halt last December at 2.5%, when the stock market threw up and lost 20%. We currently are at 1.5%, way below historical norms, with no plans to increase, maybe ever. Of course, in a truly free market economy, interest rates would be set by the market, not by a monetary Politburo, but that ship has long since sailed.
Maybe the Fed is a little smarter than we think, and understand that our “great economy” is a sham propped up with ever greater torrents of cheap money?
Yet,
This is a failure of our education system.
What happens is that remote centralized government grows and involves itself increasingly in just about everything. The centralized government is heavily influenced by giant remote centralized private corporations and so called voluntary organizations. These also tend to consolidate and seek their own interests and succeed. Any doubts just look at the size and involvement of the Federal government in the economy and in the operations of state governments. The direction is unambiguous and it hasn’t shrunk in many decades. It seems natural, but does the Federal government add insights? detailed knowledge, better management, value added? The Feds can’t know thousands of cities and towns so have to make generalizations about everything and through time those simplify and become more easily controlled. If it isn’t bottom up, and overwhelmingly private, it goes in the wrong direction. We welcomed this because local government was “corrupt” i.e. some locals could buy influence, especially in the larger states and state and city governments were also growing. We tend to think that modern complexity requires greater centralization and expertise, but those experts can only make generalization as they cannot know the substance and how folks, their economies and their governments vary from place to place, local corruption gets fixed, changes, adapts, gets replaced, and most importantly, could be shrunk. Federal involvement doesn’t and it too will eventually corrupt but doesn’t need to be corrupt to destroy freedom which is what makes our economy work. Government is the problem always everywhere, but it’s necessary in some cases, it’s not the solution. When it centralizes, which is what it does always everywhere at all levels it can’t do the things we need it to do so it invents roles that seem natural enough that we accept them.
And our experience system. If you are considered a child at 26, spend your entire life centered on yourself, then the real life kicks you in the butt when you leave college/home(maybe), you have just left soft socialism and it was comfortable. That college degree is sold as a ticket to success and not getting dirty.
A long while back, I read where a child psychologist said today’s kids are consumers, not producers. The move from farm to city sped that up. Kids don’t have to work to keep the family going; the family focus is on the child’s welfare. When people had a dozen kids, they couldn’t do that.
Why was the Doomsday Clock ever taken seriously? It has as much validity as the cartoon prophet holding a sign that “The End is Near.”