Business as Usual: The Economic Crisis and the Failure of Capitalism
Mexico is consistently noted in the minds of global investors, as it is a country rich in natural resources and is in close proximity to the US market. Ultimately, though statistics may show that entrepreneurship abounds in Mexico, what they do not portray is that the vast majority of these enterprises are concentrated among low-risk, low-value added endeavors that require minimum investments of capital. Additionally, studies many times leave out the fact that most attempts to open a business are met with stringent and expensive legal requirements that often leave the entrepreneur operating small, under-the-table businesses.
This paper takes a comprehensive look at the complexity of Mexican entrepreneurship, both through research and field study to see the stories behind the statistics. This paper reviews the obstacles facing entrepreneurship in Mexico for business people of all economic levels, and ultimately concludes that in order to better foster an entrepreneurial environment, the country needs to understand key economic, socio-cultural, and political factors pertaining to business ownership.
Read the full paper at this link: business-as-usual-challenges-to-entrepreneurship-in-mexico-final. And if we take Keynes seriously as a critic of capitalism although a limited one , is it not necessary to go back even further to the greatest critic of all: Karl Marx?watch
Paul Mattick Jr.
Capitalism, according to Keynes, was a system characterized by uncertainty. Investment lost its dynamism when expected profits on new investment were depressed, due primarily to present and anticipated demand constraints. As investment outlets vanished, capital turned to speculation, giving rise to asset bubbles that generated financial instability and the prospect of more serious crises in the future.
And he argued for limited controls on international movements of capital. Today figures like Krugman are seen as partly challenging these conclusions, and as representing the return of Keynesian economics.
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Nor is capitalism questioned. The crisis is treated as a kind of external shock or, as Krugman says, the spread of an unknown virus. Yet, the fact that capitalism is an inherently contradictory historical system, which displays increasing irrationality in its later stages is off limits within the economics mainstream, even among its supposedly left of center theorists, such as Krugman and Joseph Stiglitz. It did not fully explain the core contradictions of capitalism.
For a truly general theory of accumulation and crisis under capitalism Marx together with later Marxian political economy remain critical. The nature of this process was such that it was unending. Moreover, the very existence of a system organized in this way made it possible for a crisis to occur through a shortage of effective demand.
For Marx, there was never any doubt about the root cause of capitalist economic crises. The subsequent credit swindle proves that no real obstacle stands in the way of the employment of this surplus-capital. However, an obstacle is indeed immanent in its laws of expansion, i. For Marxists, beginning with Hilferding, Lenin, and Luxemburg, the historical evolution of the system in the early twentieth century was understood primarily in terms of the development of a new stage of capitalism, often referred to as monopoly capitalism.
This reflected the fact that the most significant change in the structure of capitalism in the twentieth century arose out of what Marx called the concentration and centralization of production, resulting in the rise of the giant firm and the modern credit system. The most ambitious and sustained attempt to develop an analysis of how capital accumulation was altered in the economy of the giant firm was developed by Michael Kalecki, Josef Steindl, Paul Baran, Paul Sweezy, and Harry Magdoff.
These thinkers argued that the capitalist economy did not naturally tend toward rapid growth. The main problem of accumulation for monopolistic corporations was to find sufficient investment outlets for the enormous and rising surplus at their disposal. Short of new historical factors that increased investment outlets, absorbing surplus capital, the accumulation system tended to sputter out. But by the s these countervailing factors to the tendency to stagnation were mostly on the wane. The result was a rapid slowing down of the economy. Net investment in the United States declined, with the investment that was taking place being fed largely out of corporate depreciation funds.
In this situation, a new outlet for the surplus profits of corporations was needed. Capital, lacking investment outlets, increasingly flowed into financial speculation, while the financial services industry, so-called, was able to come up with more and more new instruments to absorb this capital. The longer that debt ballooned without a major contraction the bigger the problem would become.
Total debt in relation to GDP in the U. But the real economy showed an increasing addictive toleration—the need for more to get even a decreasing effect—to the expansion of debt. In the s the increase in U. GDP was about sixty cents for ever dollar of new debt, by the early s this had decreased to around twenty cents for every dollar of new debt. A critical element in the development of the United States as the center of what became a worldwide financialization of capitalism was the role of the dollar as the hegemonic world currency, allowing the U.
This turned the U. The vast and growing U. The process is coming to an end with the previously unimaginable extent of the new debt that must issue from the U.
Yet, although the U. In , Paul Sweezy declared that globalization was a very long-term trend of capitalism, traceable to its very origins in the fifteenth and sixteenth centuries. This globalizing trend had major effects in some periods such as the rise of China as a major force in the world economy. If the financialization process were to go into reverse or even to slow, Sweezy suggested, the result would be a deep stagnation.
There was no telling when this would happen. Financialization, Magdoff and Sweezy argued, could continue for some time. Still, at some point the rising mountain of debt would grow beyond the capacity of capitalist governments to intervene effectively as the lender of last resort, and a financial avalanche would result in an unprecedented crisis.
The most likely long-term result was a deep slowdown in the trend-rate of growth.
With the Great Financial Crisis of —09 and the advent of the most serious economic downturn since the Great Depression these expectations based on an understanding of the historical development of the system have come true. In terms of the conditions that are to be experienced by working populations around the globe as a result of this unprecedented downturn comparable only to the s the worst is clearly still to come.
Already, emerging economies, where the crisis may turn out to be most wrenching, are finding their export markets drying up.
For China, with exports in —06 amounting to over 30 percent of GDP, and net exports close to 4 percent of GDP, the shrinking of markets in the United States, Europe, and Japan constitutes a serious threat. China currently is experiencing the sharpest deceleration in economic growth in thirty years. Chinese exports have dropped, auto sales have plummeted, and jobs are shrinking in the cities. House prices are now falling in major urban areas and there is a drastic decline in real estate investment, which spells a much bigger financial crisis.
The sharp drop in economic growth and looming signs of deflation in China, it is feared, will pull world economic growth down to close to zero. Economic crises are endemic to capitalism, but the level of economic disaster affecting the system, as shown by conditions in the United States, on the one hand, and China, on the other, is now without precedent in the post-Second World War period, and the end is not yet in sight. In addressing capitalism as a failed system I have focused first on the deepening economic crisis. The greatest peril is the growing threat of planetary ecological collapse.
Here the danger is much greater than in the case of the world economy but the sense of alarm and the call for immediate and massive action is less widespread. The world [at present] faces a breakdown of the global financial system. The consequences are staggering, with ripple effects the world over that deliver the severest blows to the poor. Fear is rising. One would have expected somewhat of the same level of anxiety with regard to the looming breakdown of major parts of the Earth system—rapid deforestation, overfishing, freshwater scarcity and the disappearing Arctic sea ice.
Reports of such events and processes are abundant, but the level of concern is still conspicuously low.
The most serious ecological threat is of course global warming, which is inducing widespread, multi-faceted climate change, with disastrous implications for life on earth. But in a wider sense, the global environmental crisis involves manifold problems and cannot be reduced to global warming alone.
“Business As Usual: The Economic Crisis And The Failure Of Capitalism”: Paul Mattick
These multiple hazards have a common source in the world economy, including: the extinction of species, loss of tropical forests as well as forest ecosystems generally , contamination of and destruction of ocean ecology, loss of coral reefs, overfishing, disappearing supplies of fresh water resources, the despoliation of lakes and rivers, desertification, toxic wastes, pollution, acid rain, the approaching exhaustion of easily available crude oil resources, urban congestion, the detrimental effects of large dams, world hunger, overpopulation, etc.
Together these threats constitute the greatest challenge to the survival of humanity since its prehistory. The global warming threat is rapidly closing in. The combination of momentous environmental tipping points and positive feedback mechanisms accelerating climate change have convinced a growing number of climatologists that irrevocable and catastrophic climate change is inevitable unless actions are taken in the next decade or so drastically to reduce greenhouse gas emissions.
Moreover, the world is on a course under business as usual that could well lead to average global temperature increases two or even three times as high during this century, spelling an inferno for life on the planet. If scientists are telling us that ecological time is running out if we wish to avoid catastrophic global effects, mainstream economists addressing the climate issue claim that we still have plenty of room in which to maneuver.
But in reality, as opposed to bourgeois economics, this flies in the face of all scientific-ecological assessments, threatening absolute catastrophe to human civilization and the planet as we know it. Indeed, there is only one way of accounting for the fact that orthodox economists constitute the leading ideological opponents of aggressive reductions in greenhouse gas emissions, even at the risk of a planetary inferno—and that is their primary role as ideological defenders of the capitalist system and promoters of its drive for profits and accumulation at any cost.
Nothing so clearly demonstrates what John Kenneth Galbraith characterized in the title to his last book as The Economics of Innocent Fraud.
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The fundamental ecological flaws of the capitalist system have been emphasized primarily by critical political-economic thinkers coming out of or deeply influenced by the Marxist tradition. The level of economic activity in each period starts with the end point of the previous period, leading to a doubling of economic output in, say, a quarter-century at a 3 percent annual rate of growth—a process which is interrupted, but not brought to an end, by business cycle downturns. The driving force of this expansion is capital accumulation and the search for ever expanding profits.
The country that has experienced the fastest rate of growth over a sustained period of time is of course China where the economy, according to the rather fantastic and somewhat suspect claim by Bloomberg. Under capitalism, Marx argued,.