Capitalism is an irrational system

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Economist Paul Krugman, in his new book - End the Depression Now! - and recent opinion columns in the New York Times, expresses exasperation with sections of the political and economic elite on both sides of the Atlantic over their stewardship of the economy.
 
Krugman says too many people at or near the levers of power are choosing austerity policies that could well send the world into a far deeper economic quagmire.

What drives him nearly crazy is that other choices exist and could easily be pursued if the will were there on the part of highly placed decision-makers. Such choices include accenting government spending, allowing for modest inflation, and economic growth. These would, says Krugman, lift the global economy out of the doldrums, including bringing the unemployment rate down from its current depression levels.

But to his consternation, the language and practice of austerity drowns out the voices of reason and economic revival both here and in Europe.

So the question is: What explains this seemingly irrational attachment to policies that leave the U.S. and Europe in stagnation and could well throw both (and the world for that matter) into a deep depression?

The answer has three parts, all interrelated.

First of all, proponents of austerity in high places ( the most zealous are on the political right - Merkel in Germany, Cameron in the UK, and the Republicans in the U.S. Congress) are tethered to an erroneous economic argument. That is, that belt-tightening is necessary for economic expansion because it boosts investor confidence, tamps down inflationary pressures, and prevents evil public capital from crowding out sacred private capital in the marketplace.

But this argument has been ably refuted on numerous occasions by Krugman and many others. And it has proved terribly wanting in countries where it has been the practice.

Second, behind every policymaker espousing austerity is not some defunct economist as John Maynard Keynes once suggested, but powerful corporate class interests, and especially finance capital.

For these interests, a protracted economic downturn, as we are now experiencing, is an opportunity as well as a crisis. On both sides of the Atlantic, it is a singular moment for big capital to radically rearrange to its advantage the economic and power relations that have been embedded in advanced capitalism for more than a half century.

We make a mistake if we think that the top tier of monopoly capital is committed to a robust recovery that would lift all boats, to the reproduction of capitalism on an expanded scale. That fiction is best left in introductory economic textbooks.

A capitalist economy oscillating around a low level of economic activity not only is capable of generating profits, but can also strengthen the bargaining hand of capital against labor and the popular movement. Indeed, a world economy characterized by overcapacity, stagnation, and intensified competition, provides optimal conditions for rolling back the political and collective bargaining rights and benefits won in an earlier period of capitalist development.

Finally, capitalism, we should not forget, is an irrational system. Its commitment to the structural logic of capital accumulation and profit maximization makes it so. This has always been the case, but it takes on even greater force in this era of structural crisis and environmental destruction on a global level. No matter where we turn, it seems like capitalism is aggressively pursuing polices that make no sense from the standpoint of humanity, economic sanity, and nature.

Capitalism needs to be replaced.

Photo: "Your greed = our crisis? No way!" Banner held by Croatian union members in a European trade union demonstration on the theme "No to austerity - For social Europe, for fair pay and for jobs," April 9, 2011, in Budapest. HatM CC 2.10

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  • Capitalism lets the people who want a product determine the price of that product based on simple supply and demand… the self-correcting mechanism is “scarcity.” Everything is scares, as we say, in economics. The more scares it is, the higher the price; or the less people want it the lower the price. For example, sand is not ‘scares’ therefor it is cheap. The communist made Yugo car is also ‘scares’ but also cheap… because it’s crap and nobody wants it. It’s crap because the people who made them had no hope of a better life, and so they did not care about doing a good job. Would you pay me $40,000 USD for a Yugo? No, no you wouldn’t, you would want better for your money. Deep in your heart you sir are a capitalist looking at the margin.

    Posted by ironcowboy, 08/07/2012 6:54pm (2 years ago)

  • Capitalism is objectively an irrational system. It is not sustainable economically, financially, socially, or enivronmentally.

    It continually causes crises of overproduction (really underconsumption on the part of the working class), leading to great suffering and tremendous waste of both human and material resources.

    It breeds constant war and the sacrifice of the lives and health of its young people as well as large numbers of the populations of poor countries.

    It pollutes the environment, degrading, despoiling, and poisoning the air, the water, the earth, and people's bodies.

    It runs counter to scientific advance, public education, people's empowerment, and real democracy.

    While "capitalist policies" may, sometimes, be "rational" to the 1% (i.e., in the interests of a tiny minority, and to the detriment of the vast majority, which is, itself, hardly rational from an historical perspective), that doesn't argue against capitalism itself being an irrational system, prone to devastate not only the masses, but, at times even individual capitalists.

    The only road forward for humanity is the transition from capitalism to socialism, from an irrational, inhuman, outmoded system, to a pro-human, science-based society predicated on the best interests of the people who actually produce the wealth.

    Posted by JS, 08/06/2012 7:19pm (2 years ago)

  • To suggest that capitalism is irrational and leave it at that is purely subjective and lacks scientific analysis which a communist party steeped in Marxism-Leninism must provide. Unfortunately the CPUSA has lost that ability and now rarely offers analysis that would create a discussion of class consciousness and the road to socialism.

    Of course capitalist policies appear to be irrational to the 99%, but why do the capitalist pursue such policies. A vanguard party must give the sciantific answers at every level of participation in the mass movements.

    Posted by David Bell, 07/31/2012 4:07pm (2 years ago)

  • "We need a book explaining basics of capitalism and concomitant solution- socialism, written on a level suitable for teens to understand. I cannot find it anywhere. There could be a series of books: capitalism and the environment, capitalism and the economy, capitalism and racism, etc.

    Posted by Hugh Breyer, 07/06/2012 8:18am (17 days ago)"

    I completely agree and I believe the CPUSA should have the ability to produce such materials. I certainly would love to be involved in such a project.

    Posted by David Baldinger, 07/23/2012 7:07am (2 years ago)

  • The Marxist Humanists (Leftists Progressives --- really Regressive) consider capitalism unfair,: even aggressive & oppressive & claim to be the party who helps the poor. (It was the conservatives who implemented "Affirmative Action) In reality the libs just want to make the poor feel Victimized & Oppressed to cause revolution.(and so they'll vote democrat, same as why they want to legalize illegal aliens) They see humans as basically good & therefore deserving of all basics and full equality in every way. Penalizing the productive to enable the lazy & incompetent is what seems most fair to their Godless degenerate minds rather than understanding that the ambitious & talented become prosperous and then provide jobs & opportunity for others & that they have a right to keep the fruits of their labor. Christians believe human nature to be corrupted and in need of change. They realize that to bring success teach & preach morals, ethics, values, personal responsibility, personal reliance, honesty & discipline. Capitalism is faltering only because our nation is falling away from these core values. They are being replaced with an entitlement mentality which will "progress" all the way to tyranny. (110 million, mostly their own killed by Communists) (Only to be out done by Islam 270 million)

    Posted by steve, 07/19/2012 9:53pm (2 years ago)

  • We all agree with Mr. Webb...but how do we defeat capitalism and install a rational planned economy: socialism! Do we vote Democrat? Is that our answer?
    The littany of Obama mistakes can fill volumes. His first mistake was not going "Roosevelt" on the rightwingers upon his election. We all wanted it and voted for it. He totally squandered his capital over the last 4 years. Is Obama even a good liberal? His acquiesence to military adventures costing us billions, is acceding to Bush tax cuts costing us billions, his tepid Obamacare which begs for Single Payer coverage...and to some of us, the most irritating flaw is bailing out Wall Street Banksters and sitting on the sidelines whilst they party hearty on bonus money gratis of me and you! Where's their jail time?

    Posted by Hugh Breyer, 07/17/2012 11:16am (2 years ago)

  • Capitalism has everyone brainwashed because Corporate media like Fox and talk radio absolutely dominate every square inch of public discourse like wall paper. You can't have capitalism without capitalists! And it doesn't help that so-called friends of labor like the Democrat Party get in the way of worker liberation movements by derailing us into these somewhat worthless electoral schemes (and off the streets).

    It seems that once the Warsaw Pact countries dissolved the world got worse. There wasn't a counter weight to Imperialism. The 3rd World didn't have a benefactor, and with the absence of the Soviet Union's economic support, it just became tougher for countries like Cuba to survive and thrive.

    Right now as we enter an election year we must choose between a very tepid centrist like Obama against a Mussolini fascist. The Left offers some compelling reasons to avoid both parties. Obamacare is a step in the right direction of course, but it still isn't Single Payer. Obama's line on the environment is miles better than the self-destructive anti science position of climate change denial. Plus, as Mr. Webb stated, Krugman's reasoning of public investment in infrastructure vs. austerity is the single most effective way to climb out of the economic quagmire Bush put us into.

    Posted by Hugh Breyer, 07/17/2012 11:09am (2 years ago)

  • Capitalism is anti-human, inhumane, unethical, immoral, depraved, and unremitting greed. The problem is capitalism. The solution is Communism.
    Forward to Communism!

    Posted by Non-Party Comrade, 07/12/2012 6:25pm (2 years ago)

  • Capitalism is not irrational if you are the one controlling the capital. He who controls the money controls. As I see it most of the socialist societies have pockets of elites controlling the flow of money which seems to benefit those in power the most. The capital seems to gravitate from and back into financial institutions whose leaders determine who exactly gets the money to expand whose industry be it government controlled or private.

    Posted by SwampFox, 07/12/2012 5:27pm (2 years ago)

  • Thank you, Sam, for this article. Thank you so very much.

    Posted by James Bailey, 07/12/2012 1:39pm (2 years ago)

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