Capitalism has not always existed in the world and will not always exist in the world.
Alexandra Ocasio-Cortez
Quoting Alexandra Ocasio-Cortez is perhaps the most apt way to begin a discussion on what the future holds for capitalism. Her rise to power in the political arena was almost miraculous. Having almost no electoral political experience before, she managed to defeat Joe Crowley, an esteemed member of the Democratic establishment and the leader of the Democratic caucus in the House of Representatives, in the primary for New York's 14th Congressional District. Despite being outspent 18 to 1 in the election campaign, her unabashed support for socialism was apparently more than enough to convince voters of her ability to champion their interests. Her victory in spite of overwhelming odds is only possible because of one simple fact: the people are exhausted, exhausted of the age-old supremacy of the elites and the age-old system that sustains it - capitalism.
Francis Fukuyama in his seminal work The End of History and the Last Man proudly proclaimed the end of 'history' as we know it. Written in 1992 after the end of the Cold War which saw the fall of the Soviet Union and the demise of the global communist order, the book arrogantly declared the triumph of capitalism and the liberal democracy that sustains it as the overarching ideology in the final stage of mankind's historical development. Just a quarter of a century later, however, we are faced instead with a starkly different reality. Capitalism is hemorrhaging in whatever place it is found. Inequality is on the rise with the resulting economic anxiety propelling populist tyrants and dictators into power with their heavenly promises of nationalistic nirvana amidst societal and economic chaos due to unfettered globalization and unrestrainable power of established elites. Far from seeing the end of history, what we are witnessing instead is the end of capitalism.
A clear definition of capitalism must first be established in any discussion of its structural deficiencies. Capitalism is hereby defined as the economic system that supports the process of capital accumulation by an elite class under the belief that such process will generate welfare and prosperity for society as a whole. Adam Smith's concept of the invisible hand is perhaps the best illustration of such definition of capitalism. From said definition, it can be seen that capitalism's legitimacy as mankind's natural economic organizing system is highly dependent on it sustainably and continually delivering the promise of material wealth to the masses. This no longer seems to be the case in many instances. Particularly since the 1980s with the advent of neoliberalism (capitalism on steroids), capitalism has instead metamorphosed into a system allowing the least productive members of society to leech upon the productive labor of those who have contributed much to the welfare of society. A society of rent-seekers, rather than a society of producers, is what capitalism in its late stage has allowed to thrive.
Before delving further into the issue at hand, one may also ask the question: Why should we, students of economics, be concerned about capitalism in its deathbed? Why should we make it a centrality in all of our efforts and concerns? The answer is simple. Despite all the usual jargons of economics being a study of choices, economics is first and foremost the study of the dominant mode of production in society and that mode is what we call as capitalism: the utilization of productive forces for the accumulation of capital. It is no coincidence that Adam Smith's Wealth of Nations was published only a few years after the invention of the steam engine which precipitated the rise of industrial capitalism as we know it today. Economics and capitalism are inseparable conjoined twins since birth, one cannot exist without the other. To study economics is to inevitably study capitalism in all its details and complexities, and vice-versa.
This also leads us to the necessity of understanding capitalism's impermanence. We need to first break the myth of capitalism as a natural system, a utopia that humanity will always teleologically aspire to. Forgetting that capitalism has artificial man-made root origins of its own makes it easy for us to succumb into this myth of its eternal divine-like power in organizing society and its mode of production. Seldom do we recognize that capitalism has only existed for the past 300 years and is only a stage in humanity's long-run historical trend.
Karl Polanyi's The Great Transformation made compelling arguments that prior to capitalism, humanity has always lived in economic systems of reciprocity and redistribution where people defined themselves as greater than the product of their labor. Reciprocity is defined as the mutual exchange of goods or services as part of long-term relationships whereas redistribution implies the existence of a strong political centre such as kinship-based leadership, which receives and then redistributes subsistence goods according to culturally specific principles. From the seafaring Pacific Islanders of New Guinea to the agrarian feudal society of Western Europe, these were the principles that once had primacy in determining the economic affairs of pre-capitalist societies. Nationwide markets, stock exchanges, corporations, and institutions that we would normally associate with capitalism are very recent artificial inventions that started slowly emerging in the medieval era due to a breakdown in the feudal order in 14th century Europe. Acknowledging that capitalism has artificial beginnings of its own means that its ending can also be engineered artificially. The maxim "whatever begins, must end" holds important truth here.
A clear symptom of capitalism's demise can perhaps be seen in the phenomenon called as 'The Great Decoupling'. The phenomenon refers to the general observation that since the 80s, real wage of workers has largely failed to catch up with the rise in productivity and GDP per capita. This would suggest that the workers, the individuals responsible for the creation of wealth, have not received the just compensation that they deserve for the fruit of their labor. The interest of labor is increasingly being subverted by the interest of capital. This phenomenon is also one of the main driving factor for the level of inequality that we see today.
Already, we are seeing unprecedented levels of inequality completely unprecedented before in recent modern history. This is a level of inequality that is unjustifiable in every regard. The 1% did not arrive at their position of wealth due to sheer entrepreneurial ability and superhuman hard work. Most arrived at their position through the back of inherited wealth and systematic discrimination and exploitation of the marginalized classes which are becoming more pronounced with each passing day. Even if they did, in what way is it fair and sensible that only a handful few should have access to what can otherwise deliver happiness and prosperity to the lives of many? This phenomenon of inequality and the resulting prevalence of inherited wealth in capitalism is perhaps best illuminated in Piketty's Capital in the Twenty-First Century.
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