Capitalism in the 21st Century

Capital in the 21st Century - Official Trailer - YouTube

Capital in the 21st Century

Directed by Justin Pemberton (2019)

Film Review

Based on French economist Thomas Pikety’s book Capital in the 21st Century, this film features numerous sound bites by Pikety, US economists Joseph Stiglitz and Francis Fukuyama, and various other Western historians and political scientists.

Like the book, the film’s major theme is the grinding income inequality produced by capitalism. It begins with the immense social misery that started with the 17th century Enclosure Acts (which drove my European ancestors off the common land they shared)* and significantly worsened with the industrial revolution in the mid-1800s. According to Pikety, the only time working people received a significant share of the wealth they created was with the post-World War II industrial boom. During the 1970s, the the “financialization”** of western economies resulted in a significant increase in corporate profits at the expense of workers.

In my view, the major flaw of the film (and the book) is Pikety’s failure to address the role of private money creation in growing inequality. In most Western countries, 97-98%  of the money in circulation (all but the notes and coins) is issued by private banks as loans.***

A monetary system almost entirely controlled by for-profit banks surely has far more impact on growing inequality that any other economic forces. As the filmmakers rightly point out, only 15% of current bank lending ends up in the productive economy (which banks view as too risky and insufficiently profitable), while 85% of lending goes into mortgage loans loans and speculative financial products.

Pouring massive amounts of new money into housing speculation is causing both house prices and rents to skyocket in most Western countries. This, in my view, is the primary cause of rampant inequality. In addition to fueling soaring homelessness, it leave low and middle income with less and less money for other basic necessities.

*”Financialization” is a term coined to describe the domination (starting in the 1980s) of western economies by “financial capitalism,” in which national revenue derives mainly from the sale of financial products, insurance and real estate (as opposed to manufactured goods).

**The Enclosure Acts were a series of laws that allowed wealthy landowners to privatize (enclose) land that peasant farmers previously held in common to satisfy basic subsistence needs.

***Contrary to popular belief, banks don’t issue loans from money deposited by savers – the vast majority of loans are created out of thin air subject to minuscule reserve requirements (usually less than 10%) imposed by central banks.

The film can be view free (for the next two weeks) on the Maori TV website

The Deplorables: The 400-Year History of the US Working Class

White Trash

Talk by Nancy Isenberg (2015)

Film Review

In this talk about White Trash: The 400 Year Untold History of Class in America, author Nancy Isenberg begins by exploring British attitudes towards poverty and vagrancy. The latter would heavily influence attitudes towards the landless poor in colonial America.

Prior to colonization, according to Isenberg, British elite viewed the New World as a vast wasteland they could use to construct a giant workhouse for Britain’s landless vagrants.* For several decades, the British government kidnapped vagrants (including street children) off the street, branded them, and involuntarily shipped them to North America as indentured servants.

Adopted by wealthy colonists, these attitudes provided a major impetus for opening the American West to settlement. In the eyes of the founding fathers, the supposedly “empty” lands of the western continent provided an opportunity for Eastern settlements to rid themselves of “human garbage.”

Like the British aristocracy, New World colonists were obsessed with the so-called “idleness” of the landless poor. which they viewed as hereditary. They took their physical appearance (with pervasive malnourishment leading to white hair, and yellow, prematurely shriveled skin) as evidence that their condition was congenital.

In 1790, 70% of Kentuckians were landless poor whites. By the 1850s, 35-40% of the population of most Southern states consisted of landless poor whites.

The 1950s economic boom, which would lead to the rise of the middle class and the myth of America’s classless society. This period would see the rise of trailer parks in most cities, enabling the transformation of “white trash” to “trailer trash.”

Today Reality TV, which Isenberg describes as “white trash voyeurism” is the best known cultural outlet for US working poor.

* Vagrancy was a new phenomenon in the 17th century, brought on by a series of enclosure acts between 1604 and 1814. This would drive hundreds of thousands of peasants off land that had always been held communally.


The Importance of Fascism in End Stage Capitalism


The Coming Struggle for Power

by John Strachey

Victor Golancz Limited (1932)

Free download link: The Coming Struggle for Power

Book Review

In The Coming Struggle for Power, British historian makes the prediction (writing in 1932) that capitalism is in its death throes and will end by 1950. He was wrong, obviously. Strachey had no way of predicting the tremendous boost monopoly capitalism would receive from Cold War military spending, nor the “financialization” (the shift from selling products to selling financial instruments) that would happen in the 1970s.

The book is largely historical, tracing the transition all global economies underwent from feudalism to mercantilism (large scale international trade) and from mercantilism to capitalism. In Europe both transformations were violent. Strachey points to the Rebellion of 1640 (during which Charles I was beheaded) and the Revolution of 1688 (in which James II was overthrown) during the feudal-mercantilist transition. The Enclosure Acts of the 18th century marked the mercantilist-capitalist transition. During this period British troops drove tens of thousands of families off lands they had farmed communally for more than 1,000 years – with most ending up in prisons and work houses.

Strachey also stresses that neither the French Revolution nor the American Revolution was really about political freedom or equality. The real purpose of both wars was to end old feudal relationships that interfered with the right of the new capitalist class to freely produce, buy and sell goods at a profit

The Inevitable Decay of Monopoly Capitalism

Strachey takes the Great Depression of the 1930s as evidence that capitalism has reached its final stage of monopoly capitalism. Quoting Lenin, he lists the three telltale signs that monopolistic capitalism has begun to decay:

1. The monopolistic corporations that control finance capital (ie banks) essentially merge with the monopolistic corporations that control production.
2. There’s growing focus on exporting capital (ie moving factories overseas).
3. National governments, which are essentially controlled by their monopolies, are in constant conflict with one another over who will control the resources, markets and cheap labor of the Third World.

Gee, this sounds familiar. The parallels with 2017 are uncanny.

The Inevitable Rise of Fascism

Strachey also writes about the important role of fascism in end stage capitalism. The declining profits and growth (ie stagnation) associated with end stage capitalism inevitably lead to reduced wages, poorer working conditions and a claw back of social welfare benefits enacted during more productive periods. This, in turn, leads to more conflict between workers and capitalists. Ensuring that production continues during a period of heavy stagnation necessitates the rise of fascism, in which the capitalists themselves organize workers into right wing populist movements which enact laws unfavorable to working people.

How Capitalism Stifles Intellectual Life

For me, the most interesting section of The Coming Struggle for Power concerns the stifling effect of corporate capitalism on intellectual life. Emphasizing the narrow ideological framework capitalism imposes on intellectuals, he devotes one chapter each to religion, philosophy and science and two to literature.

Because “capitalist” theologians and philosophers are limited to value systems that support profit taking and wealth accumulation, humankind has made absolutely no progress in 200 years in leading more moral and ethical lives. This stifling effect is also obvious in the areas of renewable energy technology (people forget Carter had a solar panel on the White House in 1979) and health science. At present, the profit motive has distorted health care to the point that many medical interventions actually make people sicker.

Class Society and Inequality: Debunking the Myth

White Trash: The 400-Year Untold History of Class in America

By Nancy Isenberg

Viking (2016)

Book Review

White Trash is a meticulously documented investigation of the historical roots of class inequality in the US. Despite the warm and fuzzy founding myths all American children are taught in school, the foundation for class inequality was laid during the early colonization of North America. The wealthy English elite who financed the colonies viewed the New World as a giant workhouse for England’s surplus poor (following the Enclosure Acts that drove them off the commons). British vagrants, vagabonds and convicts were both voluntarily and involuntarily transported to North America as apprentices, indentured servants and impressed* seaman. A surprising number of indentured servants, particularly in New England, were teenagers.

Most indentured servants (who functioned as virtual slaves) were promised land on completing their term of servitude. However nearly all went on to lose their land to property speculators and rigged taxation schemes, becoming squatters on the outskirts of established settlements. Comprising at least half of the population of most colonies, they were used by colonial elites as a wedge to encroach on Native American lands – only to be driven off their farms once the land was cleared and planted.

The lifestyle enjoyed by these squatters and their descendants was one of entrenched poverty and malnutrition, as well as hookworm, pellagra and other chronic illnesses associated with malnutrition. The disparaging attitude of wealthy elites and the emerging middle class towards this population clearly debunks ubiquitous corporate media claims about the “classless” nature of US society. Labels applied to them have changed over time, but the most prevalent have included “white trash,” “rednecks,” “mudsills,” and “mudeaters” (mud eating is a common symptom of hookworm). During her recent election campaign, Hillary Clinton referred to them as “deplorables.”

Isenberg reveals that post-World War II industrialization would lead many of these families migrate to northern cities, where they became “trailer trash.”

The wealthy elites have alternated between blaming white trash squatters and their descendants for their miserable circumstances and attributing their problems to genetic aberrations. The latter would lead to the eugenics movement and forced sterilization in the 20th century.

For me the most interesting parts of the book concerned the election of Andrew Jackson, the first “white trash” president, and the effects of slavery and the plantation system in creating a permanent “squatter class.” During his term as President, Jackson was repeatedly mocked by the elite-owned press for his lack of refinement – in much the same way as President-elect Donald Trump.

Isenberg assets that the creation of massive plantations maintained by slave labor created a permanent “squatter class” by driving an unprecedented number of poor white settlers off their land. She also maintains that the secession of seven states (which led to the Civil War) was more about preserving racial and class hierarchies than about preserving states rights. An astonishing number of poor southern whites either fought for the Union side, deserted or participated in food riots to protest shortages stemming from the exclusive dedication of prime agricultural land to cotton (rather than food).

*Impressment refers to the involuntary kidnapping of men, during the 18th and 19th century, into a military or naval force.

Originally published in Dissident Voice

The Innate Sloth and Indolence of the Working Class


The Invention of Capitalism: Classical Political Economy and the Secret History of Primitive Accumulation

By Michael Perelman
Duke University Press (2000)

Download Free PDF

The Invention of Capitalism is about the origin of an economic concept known as “primitive accumulation.” Marx defined primitive accumulation as the process by which precapitalist modes of production, such as feudalism and chattel slavery, are transformed into the capitalist mode of production. Using the term somewhat differently, Perelman describes it as the brutal process by which government denies peasants the means of subsistence to force them into wage labor.

Tracing the rise of capitalism in the 18th and 19th century, the Invention of Capitalism also studies the origin of the concept in the work of classical economists, such as Adam Smith, Ricardo and Malthus.

Forcing Workers to Accept Wage Labor

Nearly all the 18th century economists and social philosophers seem to agree that workers never voluntarily accept wage labor so long they have alternative means of providing for themselves. They all acknowledge, either directly or indirectly, that it’s natural for human beings to prefer “self-provisioning,” in which they own or rent a piece of land to produce their own food, clothing, fuel and other necessities. In addition to allowing them more control over their work, there is more leisure time associated with this lifestyle, as well as strong community ties that disappear with wage labor. Unless brutal force must be applied to strip people of the ability to provide for themselves, they never voluntarily agree to wage labor.

In Britain, “primitive accumulation” was largely accomplished through the Enclosure Acts, the Poor Laws and the Game Laws. The Enclosure Acts drove peasants off large tracts of land they had farmed communally for thousands of years; the Poor Laws forced disposed peasants into poorhouses and workhouses; and the Game Acts denied them the right to hunt (ie poach) or gather berries, firewood etc on unoccupied land.

Capitalism developed more slowly in Scotland, France, Italy, Spain and the British colonies, where the ruling elite was less savage in stripping the peasantry of access to land. These regions enjoyed a long transition in which factory workers performed wage labor and self-provisioning simultaneously, by raising crops and chickens and engaging in spinning and other crafts in their leisure time.

The Innate Sloth and Indolence of Workers

As Perelman quite ably demonstrates, most classical economists gloss over the brutal force required to establish a successful capitalist economic system. A few of the lesser known political economists (Perelman focuses in Sir James Steuart, one of Adam Smith’s rivals) are honest about need for laws that prevent workers from self-provisioning. They blame the need for such laws on an innate tendency towards “sloth and indolence” in workers and peasants (and indigenous peoples).

Perelman devotes special attention to the Scottish economist Adam Smith and The Wealth of Nations, as well as the political economists and social philosophers who influenced Smith’s work. He also explores attitudes toward primitive accumulation in the work of Marx, Benjamin Franklin, Lenin and Mao Tse Tung. The forceful primitive accumulation that industrialized the Soviet Union and Communist China occurred much more rapidly than in Western Europe or North America. This makes the Soviet and Chinese process appear much more savage. However a close look at British history suggests they were far more brutal, especially in Ireland and the colonies, than either the Chinese or Soviets.

Yields Drop Under Commercial Agriculture

The part of the book I found most interesting concerns the drop in crop yields that occurred with the shift from labor intensive “spade labor” to commercial agriculture employing horse driven plows and eventually farm machinery. This corresponds closely with modern research showing that plowing reduces yields by destroying soil fertility. Then, as now, it’s clear that the goal of commercial agriculture isn’t to produce more food but to extract more profit from other people’s work.

A Return to Self-Provisioning

Perelman’s research seems especially significant in the face of growing unemployment and part time and casual labor. A growing number of unemployed and part time workers use their enforced leisure time to plant veggie gardens, collect rainwater, preserve their own food and make their own clothes and cleaning and beauty products. In other words, the cycle of primitive accumulation is being reversed, as more and more people leave formal employment and return to self-provisioning.