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PERSPECTIVES
Capitalism’s Deeper Problem
July 15, 2014
by Richard D. Wolff

Then in the 1970s, these circumstances profoundly changed. The rapid spread of jet air travel and global telecommunications enabled old-center capitalists to consider relocating their production facilities to lower wage areas (since monitoring and control could be accomplished at a distance). At the same time, mounting economic problems, crises and implosions of many state capitalist and poor nations undercut their efforts at independent paths of economic development. Their leaders were looking for a changed strategy of development.

Old-center capitalists seeking to relocate to the former colonial territories encountered there local partners eager to make and profit from deals with them. Hundreds of millions of new, much cheaper workers thereby became available to old-center capitalist employers. Globalization meant above all a sudden increase in the global supply of labor power, yielding an historically unprecedented buyers’ market for labor.

Globalization meant above all a sudden increase in the global supply of labor power, yielding an historically unprecedented buyers’ market for labor. By relocating production facilities out of their old centers, capitalists drastically cut labor costs.
By relocating production facilities out of their old centers, capitalists drastically cut labor costs. They could escape the higher real wages and welfare state services won by generations of old-center workers. The profit possibilities were stupendous. Competition from those who first successfully relocated then forced even reluctant old-center capitalists to follow.

Many of the firms formed in, nurtured (and variously subsidized) by the old capitalist centers abandoned them. Detroit, Cleveland and so many other capitalist centers – in the US but also in Europe and Japan – have thus been declining, often for decades, with tragic human as well as economic costs. Loss of jobs, incomes, benefits and public services shaped ever more individuals’ lives. Capitalism’s globalization produced more enemies as the gaps between its beneficiaries and victims widened. Growing skepticism and then rejection confronted the euphemisms used to obscure globalization’s goals and effects (“deindustrialization,” “post-industrialism,” “outsourcing,” “world-class competition,” “free-trade associations,” “declining middle class,” and “austerity,” among others).

Wealth and income distributions consequently polarized in the old capitalist centers. Capitalists’ profits grew sharply as they relocated production to lower waged workers in what became the new centers of capitalist growth (especially China, India, Brazil and so on). At the same time, such shifting of production provoked unemployment in the old centers, loss of higher-paying jobs that moved abroad and increasingly, the descent of workers into lower-paid, largely service-sector jobs. Old-center economies thus exhibited stagnant or falling real wages alongside soaring profits. The gap between rich and poor – between those whose incomes depend chiefly on profits and those who depend chiefly on wage work – starkly widened.

At the same time, wealth rose rapidly for the new-center partners of the old-center capitalists. Those partners who enabled old-center capital to flow into their societies and those who most successfully sold the resulting outputs back into old-center markets became wildly wealthy. Yet the mass of their fellow citizens remained mired in the poverty of their long-term economic underdevelopment. While new-center wages sometimes rose, their absolute levels remained low.

Sharply rising income and wealth inequalities thus characterized the new centers of capitalism as well as the old. Globalization distributed capitalism’s deepening inequality throughout the world. It likewise spread the usual effects of such inequality: speculation, real-estate bubbles, gross conspicuous consumption by the rich, political corruption and so on.

Chizzang wrote:The original article (thanks for the link) is actually damn interesting... there's no real breakthrough information but he does seem to sum-it-up nicely...

I have a whole bunch to say about this - as I now work for a company that actually manufactures its products right here in the United States of America

CID1990 wrote:

Chizzang wrote:The original article (thanks for the link) is actually damn interesting... there's no real breakthrough information but he does seem to sum-it-up nicely...

I have a whole bunch to say about this - as I now work for a company that actually manufactures its products right here in the United States of America

you make Post It notes?

Grizalltheway wrote:No wonder you chimed in with snarky name calling and nothing to offer in rebuttal.

Baldy wrote:

Grizalltheway wrote:No wonder you chimed in with snarky name calling and nothing to offer in rebuttal.

Rebuttal?

This is a Marxist attempting to explain and describe Capitalism to a group of "progressives". That's like a McDonalds order jockey trying to teach the law of diminishing returns to a baboon.

Baldy wrote:A wonderful article from the Marxist point of view from a respected Marxian Economist.

No wonder kalmy, Chizz Stain, jizzkid, and Comrade Cat are forming a circle jerk of appreciation.

Cap'n Cat wrote:

Baldy wrote: Rebuttal?

This is a Marxist attempting to explain and describe Capitalism to a group of "progressives". That's like a McDonalds order jockey trying to teach the law of diminishing returns to a baboon.

Yep, ol' Baldy is the dive-in-and-criticize-but-never-offer-anything-of-substance prick upon which The Cap'n is modeling his new approach here! He's perfected the art!!!



Like a Conk in the health care debate - repeal Obamacare but offer no alternative - Baldy is consistent, though!

kalm wrote:

Baldy wrote:A wonderful article from the Marxist point of view from a respected Marxian Economist.

No wonder kalmy, Chizz Stain, jizzkid, and Comrade Cat are forming a circle jerk of appreciation.

What do you think was Marxist about it?

Grizalltheway wrote:Excellent article.

Too bad no one will read it or refute it.

JohnStOnge wrote:Ok I read it. You know, you guys bitch at me because I try to back up what I write. That guy wrote a whole bunch of stuff without substantiating any of it. Like saying, "the so-called 'middle classes' are evaporating." that's just objectively false. I won't post references because you guys don't like that but it's just false. You look at income distributions and there is absolutely no support for that statement...at least not in the United States.

That article is complete crap. He just makes a bunch of unsubstantiated statements then follows that with a bunch of other unsubstantiated statements submitted to explain the other unsubstantiated statements.

Ivytalk wrote:

JohnStOnge wrote:Ok I read it. You know, you guys bitch at me because I try to back up what I write. That guy wrote a whole bunch of stuff without substantiating any of it. Like saying, "the so-called 'middle classes' are evaporating." that's just objectively false. I won't post references because you guys don't like that but it's just false. You look at income distributions and there is absolutely no support for that statement...at least not in the United States.

That article is complete crap. He just makes a bunch of unsubstantiated statements then follows that with a bunch of other unsubstantiated statements submitted to explain the other unsubstantiated statements.

JohnStOnge wrote:

Ivytalk wrote:

What, do you want me to post something on the inflation adjusted income distributions showing that the idea that the middle class if evaporating is a myth?

JohnStOnge wrote:Ok I read it. You know, you guys bitch at me because I try to back up what I write. That guy wrote a whole bunch of stuff without substantiating any of it. Like saying, "the so-called 'middle classes' are evaporating." that's just objectively false. I won't post references because you guys don't like that but it's just false. You look at income distributions and there is absolutely no support for that statement...at least not in the United States.

That article is complete crap. He just makes a bunch of unsubstantiated statements then follows that with a bunch of other unsubstantiated statements submitted to explain the other unsubstantiated statements.

Ivytalk wrote:

JohnStOnge wrote:
What, do you want me to post something on the inflation adjusted income distributions showing that the idea that the middle class if evaporating is a myth?

If you insist...

Ivytalk wrote:Oh, there you go, bringing class into it again!

Spoiler: show

You keep saying this, but you've never really proved it. Wages have pretty much been stagnant when compared to other countries and the cost of things like housing, education, insurance, etc. Christ, countries like Sweden and Canada have seen stronger growth with greater social spending and wealth distribution as noted here:

http://mobile.nytimes.com/2014/04/23/up" onclick="window.open(this.href);return false; ... rrer=&_r=0

America! We're number 7 or 8...perhaps top 15!!!!

Ivytalk wrote:Oh, there you go, bringing class into it again!