The Final Question

David Gregory: “What is the future of capitalism?”

From January 12, 2009 “Meet the Press”:

David Gregory: Let me ask a final question here in a conversation that will certainly go on. Mark Zandi, on the other end of all this, what’s the future of capitalism?

Mark Zandi: Oh, capitalism’s going to be fine. I mean, we’ve got a crisis of capitalism. We made a lot of mistakes as capitalists. And that’s why we have a government, and that’s why government has to be bold and step in the breach, and that’s what they’re doing. And on the other side of this, government will figure out a way to step out gracefully.

Paul Gigot: Well, I think capitalism will survive, but I think a good question now at this particular juncture is what kind of capitalism? Are we moving to a European brand; a, a much larger welfare state, a much larger entitlement state with slower growth, higher long-term unemployment? Or are we going to stick with what has been for the last 30 years, more or less, a relatively successful model? We’ve had this blowup. If we don’t make mistakes, we can get through this.

How remarkable for the most prestigious and longest running (61 years) television show to raise the question of the future of capitalism. Moreover, it is a sign of the times that there is a direct reference to the system itself rather than the usual euphemisms (free market economy, private enterprise, etc.) That is obviously a function of the severity of the crisis. In times like this it is difficult to be taken seriously when you use bland language to describe a condition that is anything but bland.

Since the role of “Meet the Press” is to maintain the ideological hegemony of the ruling class cutting across party lines, it is no surprise that they would call upon the likes of Zandi and Gigot to reassure their audience.

Zandi, who is the chief economist for Moody’s, a bond pricing firm, is fairly typical of the tendency of bourgeois economists to believe that the system is invulnerable to crisis, as long as the short-term indicators look good. In 1997 he is practically intoxicated over the housing market:

St. Petersburg Times (Florida), November 22, 1997, Saturday
Economists, Realtors raise a toast to market future
Byline: Judy Stark

So who’s dismal? Not these economists.

It was all they could do to delay breaking out the champagne to toast the current thriving economy and the prospect of more of the same next year.

That delighted delegates at the annual convention of the National Association of Realtors last week.

“The current economic environment is nothing short of stellar,” said Mark Zandi, chief economist of Philadelphia-based Regional Financial Associates.

If anything, Gigot is even more of a pro-capitalist hack, as indicated by his position as editorial page editor at the Wall Street Journal. This is like inviting Hugh Hefner to muse on the subject of the future of large-breasted women. He will have plenty to say, all of it predictable.

It is also remarkable that this discussion is taking place just six months short of the 20^th anniversary of the publication of an article by Francis Fukuyama in the Summer 1989 National Interest titled “The End of History“ that would eventually become a full-length book. The article begins:

IN WATCHING the flow of events over the past decade or so, it is hard to avoid the feeling that something very fundamental has happened in world history. The past year has seen a flood of articles commemorating the end of the Cold War, and the fact that “peace” seems to be breaking out in many regions of the world. Most of these analyses lack any larger conceptual framework for distinguishing between what is essential and what is contingent or accidental in world history, and are predictably superficial. If Mr. Gorbachev were ousted from the Kremlin or a new Ayatollah proclaimed the millennium from a desolate Middle Eastern capital, these same commentators would scramble to announce the rebirth of a new era of conflict.

And yet, all of these people sense dimly that there is some larger process at work, a process that gives coherence and order to the daily headlines. The twentieth century saw the developed world descend into a paroxysm of ideological violence, as liberalism contended first with the remnants of absolutism, then bolshevism and fascism, and finally an updated Marxism that threatened to lead to the ultimate apocalypse of nuclear war. But the century that began full of self-confidence in the ultimate triumph of Western liberal democracy seems at its close to be returning full circle to where it started: not to an “end of ideology” or a convergence between capitalism and socialism, as earlier predicted, but to an unabashed victory of economic and political liberalism.

As a barometer of confidence in the capitalist system, Fukuyama’s writings tend to reflect its decline over the past 20 years to the point that he was moved to write an article titled “The Fall of America, Inc.“  that appeared in the October 13, 2008 Newsweek. In keeping with the whistling in the dark character of Zandi and Gigot’s replies to Gregory, Fukuyama holds out hope that things will get better under an Obama administration that is ready to move against the core economic beliefs of the President he served in the 1980s:

Still, another comeback rests on our ability to make some fundamental changes. First, we must break out of the Reagan-era straitjacket concerning taxes and regulation. Tax cuts feel good but do not necessarily stimulate growth or pay for themselves; given our long-term fiscal situation Americans are going to have to be told honestly that they will have to pay their own way in the future. Deregulation, or the failure of regulators to keep up with fast-moving markets, can become unbelievably costly, as we have seen. The entire American public sector-underfunded, deprofessionalized and demoralized-needs to be rebuilt and be given a new sense of pride. There are certain jobs that only the government can fulfill.

Now if I had been a guest on “Meet the Press” along with Zandi and Gigot, this is how I would have answered Gregory’s question-until security guards dragged me off:

Unlike Mr. Zandi and Mr. Gregory, I don’t think capitalism has much of future at all. The financial crisis that we are passing through will prove resistant to Obama’s half-hearted attempts to stimulate the economy through public works projects and other pump-priming initiatives. If they did not work under FDR’s far more ambitious New Deal, how can they possibly work today? That is unless Obama wants to emulate FDR’s most successful public works project as Paul Krugman suggested in a November 10 2008 op-ed piece in the NY Times: “What saved the economy, and the New Deal, was the enormous public works project known as World War II, which finally provided a fiscal stimulus adequate to the economy’s needs.”

Notwithstanding Paul Krugman’s rather provocative suggestion, it seems doubtful that arms spending is a feasible solution for the current impasse even given the US’s insatiable appetite for war-making. Ironically, the growth of the American economy overall and reductions in the cost of making weapons has virtually excluded WWII type solutions for restoring the health of the economy. To quote Randolph Bourne, “war is the health of the state.” That being the case, it will take a lot more medicine to do the job today. Recent defense budgets have amounted to about 4 percent of GDP, while they ran 6.2 percent in the 1980s, 9.4 percent during the Vietnam War, 14.2 percent during the Korean War, and 38 percent during World War II. Simply put, the US cannot afford to spend 38 percent of GDP on the military today since the social costs of such a distorted budget would require the elimination of the very social safety net that FDR implemented in order to stave off socialist revolution.

Any way you slice it, the prognosis for capitalism is very poor indeed.