Why are we looking on helplessly as markets crash all over the world?

Will Hutton writes: There has always been a tension at the heart of capitalism. Although it is the best wealth-creating mechanism we’ve made, it can’t be left to its own devices. Its self-regulating properties, contrary to the efforts of generations of economists trying to prove otherwise, are weak.

It needs embedded countervailing power – effective trade unions, law and public action – to keep it honest and sustain the demand off which it feeds. Above all, it needs an ordered international framework of law, finance and trade in which it can do deals and business. It certainly can’t invent one itself. The mayhem in the financial markets over the last fortnight is the result of confronting this tension. The oil price collapse should be good news. It makes everything cheaper. It puts purchasing power in the hands of business and consumers elsewhere in the world who have a greater propensity to spend than most oil-producing countries. A low oil price historically presages economic good times. Instead, the markets are panicking.

They are panicking because what is driving the lower oil price is global disorder, which capitalism is powerless to correct. Indeed, it is capitalism running amok that is one of the reasons for the disorder. Profits as a share of national income in Britain and the US touch all-time highs; wages touch an all-time low as the power of organised labour diminishes and the gig economy of short-term contracts takes hold. The excesses of the rich, digging underground basements to house swimming pools, cinemas and lavish gyms, sit alongside the travails of the new middle-class poor. These are no longer able to secure themselves decent pensions and their gig-economy children defer starting families because of the financial pressures. [Continue reading…]

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1 thought on “Why are we looking on helplessly as markets crash all over the world?

  1. pabelmont

    One of the writers well expressed ideas is that capitalism (sales) has been kept going for quite a while now by consumer spending funded by loans (credit cards) rather than by adequate wages. So, it would seem, one thing that is needed is a quite general increase in wages so that credit-card debt can be paid off and, thereafter, spending continue.

    Henry Ford is credited with the idea of paying assembly-line workers enough so that they could themselves buy cars. Contrary to current capitalist practice, fair wages are not the lowest wages that workers can be persuaded to accept. Fair wages are wages that are high enough that they will be adequate to keep the capitalist merry-go-round going. Another thing entirely.

    Capitalism has rejected the idea of fair wages for quite a while now, so governments will have to step in and bring about what the owners of capital have been unable or unwilling to do themselves. Oligarchy (rule by big-capital) and big-capital ownership of mainstream media will make this necessity difficult to make clear.

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