David Graeber — Savage capitalism is back – and it will not tame itself

The real importance of Thomas Piketty's blockbuster, Capital in the 21st Century, is that it demonstrates, in excruciating detail (and this remains true despite some predictable petty squabbling) that, in the case of at least one core equation, the numbers simply don't add up. Capitalism does not contain an inherent tendency to civilise itself. Left to its own devices, it can be expected to create rates of return on investment so much higher than overall rates of economic growth that the only possible result will be to transfer more and more wealth into the hands of a hereditary elite of investors, to the comparative impoverishment of everybody else.

In other words, what happened in western Europe and North America between roughly 1917 and 1975 – when capitalism did indeed create high growth and lower inequality – was something of a historical anomaly. There is a growing realisation among economic historians that this was indeed the case. There are many theories as to why. Adair Turner, former chairman of the Financial Services Authority, suggests it was the particular nature of mid-century industrial technology that allowed both high growth rates and a mass trade union movement. Piketty himself points to the destruction of capital during the world wars, and the high rates of taxation and regulation that war mobilisation allowed. Others have different explanations.

No doubt many factors were involved, but almost everyone seems to be ignoring the most obvious. The period when capitalism seemed capable of providing broad and spreading prosperity was also, precisely, the period when capitalists felt they were not the only game in town: when they faced a global rival in the Soviet bloc, revolutionary anti-capitalist movements from Uruguay to China, and at least the possibility of workers' uprisings at home. In other words, rather than high rates of growth allowing greater wealth for capitalists to spread around, the fact that capitalists felt the need to buy off at least some portion of the working classes placed more money in ordinary people's hands, creating increasing consumer demand that was itself largely responsible for the remarkable rates of economic growth that marked capitalism's "golden age".

Anyone that didn't see this coming when the Berlin Wall fell and the USSR implode was blind to history. The thrust of Keynesianism and the New Deal was to co-opt socialism. Keynes and FDR were actually quite conservative rather than the liberal giants they are made out to be. They recognized the seriousness of the situation for capitalism and adopted an expedient approach. Once that necessity was perceived to be over, the push of the elite was for a return to the status quo ante.

The Guardian (UK)
Savage capitalism is back – and it will not tame itself
David Graeber, The Guardian