ABSTRACT
142The destructiveness of capitalism is now examined:
The price mechanism and invisible hand do not prevent periodic financial crisis, which follow exceptional booms. At the start of these cycles investment capital pours into new profit opportunities; the banking system inflates the boom creating a speculative, over-financed bubble typically turning into mania. A tipping point is reached, collapse is triggered, prices of stocks and assets connected to the boom decrease, and profits turn to losses. From inflation to depression—the psychological and economic vocabulary are interchangeable.
Money gains a semi-independent existence since banks are sources of money creation. The control by central banks of their own banking system has usually been insufficient in expansionary periods of capitalism. Banks play a major part in augmenting every boom by credit creation and they are at the root of all major financial collapses. Intertwined with the official banking system lies an enormous financial area of speculation and investment. The creation of vast, financial speculative bubbles is like Frankenstein’s monster, an apparently brilliant creation but with a life of its own, towering over the real world of production and exchange, threatening to destroy it.
Capitalism, despite its competitive ideals tends to produce cartels and monopolies. When industries start their life cycle with small firms, there is frequently an impulse towards large-scale firms emerging, which produce at much lower average cost and at larger volume scales. Some industries and trades, however, will stay dominated by small and micro suppliers since they do not possess economies of scale by which cost reductions are generated at higher-volume levels. This leads, in some industries, to a natural development of oligopolies, cartels, and monopolies. Thus, competitive, free-market capitalism undermines itself and produces uncompetitive market structures. The dangers of this are evident in the financial system, with increasing levels of concentration and dominance. The top three banks in the UK, for example, in 2015 owned assets five times the size of the UK GDP. (Haldane, 2010)
Capitalism, in reality, is allied to and dependent on the State. Although this is, as previously indicated, a strength, at the same time it illustrates a weakness of the economic system—it is crucially dependent on the State and without it could not function. Poor or mistaken policies, for example, can lead very rapidly to an economy’s ruin.
Capitalism and world domination. Capitalism replaces all previous economic systems which are far less productive. It cannot be confined to one area, region, or country. Thus, fear and desire (or greed) are the psychological drivers of the system, which, as it expands, eliminates other less efficient economic formations. Native people and their ways of life are destroyed, feudal systems are replaced, and agrarian ways of life disappear. As capitalism develops it tends to replace even previous stages of its own system. Thus, mercantilist capitalism is replaced by industrial capitalism, which, in turn, is replaced by post-industrial capitalism (service-sector dominated economies).
Capitalism and inequality. To impose equality of income and wealth destroys incentive and competition. Capitalism depends on incentives for personal gain and advancement. Without this the economy cannot function, technological progress disappears, and wealth creation dries up. Inequality arises from many sources and a certain degree of inequality is inevitable in every system, especially in capitalism. However, that does not excuse the gross inequalities 143that occur as capitalism leans towards a free-market philosophy. There is no doubt that this can be mitigated by intelligent and prudent redistributions through taxation, welfare states, public goods, and the like. It is getting the balance correct for an individual country that is tremendously difficult.
Capitalism—destruction and extinction. Many of the technologies of capitalism have a destructive impact on the planet and its animal life. Mankind has always exploited the resources of the world but capitalism is most adept at doing this because of the immense development of these technologies.
