Tuesday, February 14, 2012

Capitalism out of Control - A Failure of Government

There's no doubt that capitalism is out of control, but that's not the fault of capitalism, it's the fault of faulty economic theory and a failure of both democratic governments and totalitarian governments. (Most often because those governments have become clients of the interests they are expected to control. Not exercising control becomes the purpose of government, despite the damage that does to the nation as a whole.)

Capitalism has to function inside a framework of rules that governments establish. If governments fail in that task, capitalism becomes a destructive force.

In the introduction to her book "Getting Past Capitalism" Cynthia Kaufman says, "talking about capitalism is one of the best ways to get your ideas dismissed as extreme, as communist, or socialist or simply unrealistic". I agree with that, and several writers I've assembled would also agree. None of them attempt a full frontal assault on capitalism, one of the key principles of our social, political and economic system.

I grew up in a society which hoped that extreme poverty had been abolished, where future prosperity was the expectation. The success of the Marshall Plan in Europe after WWII, demonstrated the power of investment and economic growth. There would be no limits on our potential wealth. All we had to do was manage the economy to avoid the depressions which still seemed to part of the business cycle. Keynes showed us how to do that. Then we had to create full employment. The formula for that was innovation, and investment, and applied science. In the war years and just after that, government investment in industry was critical to the "take off" of faltering economies. Government support for new industries by tariff protection or subsidies was expected. Then the mood changed and government involvement in business was denounced. From the 1970s the key political move on the economy, was to de-regulate and allow capitalism to use the full power of markets to develop dynamic new economies. For a time that appeared to work.

We believed the myth that humanity had full control over the Earth, and that we were limited only by failure of our imagination and resource-fullness. We believed in the consumer society. We expected that with economic development, that people everywhere would be able to prosperous and happy lives as workers and consumers. The bariers were corruption, and lack of democracy, and failure in education, health and business investment. Those were problems our "experts" knew how to fix. We knew nothing of the new Earth sciences that were developing, that were about to shatter these illusions, some of us still don't understand these changes today. "Limits to Growth" was published in 1972. It seemed to make sense on one hand, but it couldn't be true, on the other hand; everything we believed, especially if you were trained in business and economics, told you the opposite.

A key problem is the falsity of our democratic institutions. We might have replaced a divine monarch with an elected parliament, but we are still a society of "big men" and big institutions. Our tribal roots are not far away. This allows the government to be controlled by those "big men", by the use of money, and information, and the ability to control of the agenda. There are many advantages in this. When business and government work together, "the trains run on time" as they said in Italy under Mussolini. However, you also get increasing Fascism, leading to the abuse of power as we currently see in the USA, China and in Russia, to mention only three. Corporate control of the government is a denial of democracy, and the source of a form of capitalism that's out of control. Capitalist excesses caused the financial meltdown of 2008. That there has been no effective remedy or regulation since then is another simple fact. No government, in the USA, the UK, in Canada or New Zealand can act effectively against it's master, the hidden men behind the financial markets.

So there's the problem. Countries that call themselves democracies, have become systems where the power of the people, has been supplanted by financial domination by unseen and unidentified "masters". Because of globalisation, the free flow of capital from market to market forces governments to adopt many "market friendly" attitudes and policies.

In 1980, the Report of the Brandt Commission on International Development Issues, made the link between the environment, social justice, world poverty and social conflict.

The first authoritative assessment of our future situation might have been J.G. Speth's report to Jimmy Carter in 1981; "Global Future; Time to Act". That report was accepted by President Carter but solidly rejected by the American political establishment. (Even though almost all it's predictions turned out to be valid.) Jimmy Carter was defeated at the next election. "Global Future; Time to Act", sank without trace.

In 1986 the Brundtland Commission produced "Our Common Future" which raised 10 principle concerns.

1. Depletion of the ozone layer of the stratosphere.
2. An increase in greenhouse gases.
3. Loss of topsoils in cropping and grasing land.
4. Depletion of old growth forest.
5. Mass extinction of species.
6. Rapid growth in the human population.
7. Mismanagement of freshwater resources.
8. Over fishing, ocean habitat destruction and pollution of the ocean.
9. Chemical pollution which threatens human health.
10. Acid rain effecting fisheries, forests and crops.


At the 1992- Earth Summit in Rio de Janeiro, Agenda 21 was signed. The corporate sector strongly opposed the proposals made. Opposition in the USA was particularly strong, opposing "world government" and rejecting the role of the United Nations in economic affairs. Several conventions were signed, which created a legal framework for action, but the rules were written loosely, and it was easy for governments to avoid taking any action. Business as usual has continued until today. Governments chose to adopt a weak policy that they knew would be ineffective. That's a failure of the political system.

By 1992 the agenda was changed slightly as the 10 principle concerns were better understood.

1. Depletion of the ozone layer. Montreal Protocol signed in 1987.
2. Climate Change. Framework for action framed. Kyoto Protocol followed.
3. Desertification. Convention to combat desertification signed in 1994.
4. Deforestation. Non-binding principles for sustainable forest management were signed.
5. Biodiversity Loss. The Convention on Biological Diversity was signed at Rio in 1992.
6. Growth in the human population. No population convention proposed.
7. Freshwater resources. A Convention on non-navigable uses of international watercourses was discussed be not agreed.
8. Marine Environment. U.N. Convention on the Law of the Sea was extended to cover ocean pollution, overfishing, and whaling.
9. Chemical pollution which threatens human health.
10. Acid rain effecting fisheries, forests and crops.


There are significant costs of not acting now, but those are not our costs. Our children will pay that cost on our behalf. Governments dependent on corporate support for funding find it impossible to regulate business in any way that's effective. Government is forced to subsidise things they should regulate and control. The capture of politicians by the corporate sector renders any real democracy weak and ineffective.

The only solution I can see is for the public funding of political parties and elections. That raises many difficult issues, but the present system is designed to discriminate in favour of today's elites, and they are steadfast against necessary change, because for them, change might not be advantageous.

If you ask the public if they are concerned about climate change, over-fishing, toxic pollution of the waterways, and the future supply of energy, you'll find a huge swell of support for action. Even so, governments refuse to act. Here in New Zealand both the Labour Party and the National Party are captive to corporate funding. So are all the others to some degree. MMP has improved the quality of our democracy, but we've still got work to do.

John Stephen Veitch
Open Future Limited - You may comment privately to John S Veitch using this form.

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