“The global capitalist system . . . is coming apart at the seams”. So\ndeclared capitalist and arch-speculator George Soros before a US congressional enquiry on\n19 September 1998. He has since expanded on this in a book entitled The Crisis of\nGlobal Capitalism. What has he in mind?<\/em> <\/p>\n\n\n\n By “global capitalist system” Soros doesn’t mean what we would understand by\nthe term, i.e. capitalism as a world-wide system of production for profit, but the more\nrestricted sense of present world financial arrangements which allow the more or less free\nmovement of capital throughout the world: <\/p>\n\n\n\n “The global economy is characterized not only by free trade in goods and\nservices but even more by the free movement of capital. Interest rates, exchange rates,\nand stock prices in various countries are intimately interrelated, and global financial\nmarkets exert tremendous influence on economic conditions. Given the decisive role that\ninternational financial capital plays in the fortunes of individual countries, it is not\ninappropriate to speak of a global capitalist system”<\/em> (Introduction). <\/p>\n\n\n\n It is these arrangements\u2014this single world financial market\u2014that he is saying\nis in danger of disintegrating; which of course would not at all be the same thing as the\ncollapse of capitalism that has sometimes been mistakenly predicted by some writers in the\nMarxist tradition. <\/p>\n\n\n\n \n\nSoros, following, consciously or not, a distinction made by one school of anti-imperialist\nthinkers in the 1970s and 80s, divides the “global capitalist system” into a\ncentre (US, Western Europe, Japan) and a periphery (Asia, Latin America, Russia, East\nEurope, Africa). Under this system capital flows from the centre to the periphery and\nback, supposedly to the mutual benefit of both. He sees the danger of disintegration\ncoming from countries on the periphery taking steps to stop the free flow of capital in a\nbid to avoid the negative effects of the system’s instability on their economies and\npopulations:\n\n<\/p>\n\n\n\n “To put it bluntly, the choice confronting us is whether we will regulate\nglobal financial markets internationally or leave it to each individual state to protect\nits own interests as best it can. The latter course will surely lead to the breakdown of\nthe gigantic circulatory system, which goes under the name of global capitalism” <\/em>(p.\n176). <\/p>\n\n\n\n So what Soros means by the “breakdown” or “disintegration” of\nglobal capitalism is not the collapse of the world-wide system of production for profit\nbased on the exploitation of wage labour, but only states coming to adopt measures that\nimpede the free movement of finance capital. <\/p>\n\n\n\n Soros does not believe this to be an inevitable process. As the quote above makes\nclear, he thinks it can be stopped if appropriate measures are taken at international\nlevel; global institutions must be created to lay down some basic ground rules for the\noperation of global capitalism. <\/p>\n\n\n\n For Soros is no free marketeer. In fact part of his book is a devastating attack on\nthose he calls the “market fundamentalists”, the followers of Von Mises, Von\nHayek and others, who advocate that market forces be given complete free rein and who came\ninto intellectual prominence in the time of Reagan and Thatcher. Soros levels two charges\nat them. First, that they think that markets have an in-built tendency towards creating a\nstable situation through supply and demand being in balance, while this is not the case.\nSecond, that they preach that the market is the best way to regulate all human activities.\n<\/p>\n\n\n\n Writing from his own experience, admittedly not of the real economy but only of\nfinancial markets, Soros challenges the equilibrium theory: <\/p>\n\n\n\n “Market fundamentalists have a fundamentally flawed conception of how financial\nmarkets operate. They believe that financial markets tend towards equilibrium . . .\nFinancial markets are characterized by booms and busts and it is quite amazing that\neconomic theory continues to rely on the concept of equilibrium, which denies the\npossibility of these phenomena, in face of the evidence. The potential for disequilibrium\nis inherent in the financial system; it is not just the result of external shocks” <\/em>(Introduction).\n<\/p>\n\n\n\n The external shocks which the market fundamentalists invoke are usually, of course,\ngovernment interventions of one sort or another. According to them, if governments just\nstood aside and let the magic of the market operate, there would be no slumps just\ncontinuous, smooth growth. But there is no evidence for this. Throughout the 19th century\nBritish governments pursued a policy of laissez-faire yet slumps still occurred on a\nregular basis. <\/p>\n\n\n\n The fact is that the market system does have a built-in tendency towards creating booms\nand busts rather than stability and smooth growth. As Marx pointed out, this applies to\nthe real world of market-oriented production and not just to financial markets. Soros is\neven prepared to give Marx some credit here: <\/p>\n\n\n\n ” . . .the capitalist system by itself shows no tendency toward equilibrium.\nThe owners of capital seek to maximise their profits. Left to their own devices, they\nwould continue to accumulate capital until the situation became unbalanced. Marx and\nEngels gave a very good analysis of the capitalist system 150 years ago, better in some\nways, I must say, than the equilibrium theory of classical economics”<\/em>\n(Introduction). <\/p>\n\n\n\n He claims, however, that thanks to “countervailing political interventions in\ndemocratic countries” Marx’s “dire predictions did not come true”. This is\nbased on a misunderstanding of Marx’s view. The “dire predictions” that Soros\nmentions were not, as he seems to assume, that the unregulated profit-seeking of\ncapitalists would lead to the collapse of the capitalist system but simply that their\ncompetitive struggle for profits meant that steady, smooth growth was impossible and that\ngrowth proceeded by means of booms and slumps. <\/p>\n\n\n\n Capitalism has not collapsed because it was never going to, not because of government\nintervention Marx didn’t foresee. And government intervention has not been able to\neliminate the boom\/slump cycle which Marx saw was an unavoidable feature of capitalism. <\/p>\n\n\n\n \nSoros sees himself as continuing the political philosophy of Karl Popper. As expounded in\nbooks such as The Open Society and Its Enemies<\/em> Popper argued against the idea of\ntrying to establish a “perfect” society in favour of accepting an\n“open” society as one subject to permanent improvement by piecemeal social\nengineering, by which he understood capitalism with a political structure involving\nelected institutions, the rule of law and pluralism, i.e. more or less what the West has\nhad for years. <\/p>\n\n\n\n For Popper the main enemies of his “open society” were the totalitarian\nideologies of fascism and “Marxism” (which, for him, was not just Marx’s own\nviews but those mixed up with Lenin’s and Stalin’s). Soros adds a third which he says has\ncome into prominence since the collapse of “communism”: uncontrolled capitalism.\nHence the subtitle of his book “Open Society Endangered”, though he had already\nexpressed this view in a famous article “The Capitalist Threat” that first\nappeared in The Atlantic Monthly<\/em> in February 1997 and which was widely reproduced. <\/p>\n\n\n\n Soros sees the danger coming from the penetration of market values into all aspects of\nlife, leading to social disintegration. “Monetary values”, he writes, “have\nusurped the role of intrinsic values and markets have come to dominate areas of society\nwhere they do not properly belong” (p. 206). He is in fact quite forceful in his\ncriticism of this aspect of global capitalism: <\/p>\n\n\n\n “The functions that cannot and should not be governed purely by market forces\ninclude many of the most important things in human life, ranging from moral values to\nfamily relationships to aesthetic and intellectual achievements. Yet market fundamentalism\nis constantly attempting to extend its sway into these regions, in a form of ideological\nimperialism. According to market fundamentalism, all social activities and human\ninteractions should be looked at as transactional, contract-based relationships and valued\nin terms of a single common denominator, money. Activities should be regulated, as far as\npossible, by nothing more intrusive than the invisible hand of profit-maximising\ncompetition. The incursions of market ideology into fields far outside business and\neconomics are having destructive and demoralizing social effects” <\/em>(Introduction).\n<\/p>\n\n\n\n “A transactional society undermines social values and loosens moral\nconstraints. Social values express a concern for others. They imply that the individual\nbelongs to a community, be it a family, a tribe, a nation, or humankind, whose interests\nmust take precedence over the individual’s self-interests. But a transactional market\neconomy is anything but a community. Everybody must look out for his or her own interests\nand moral scruples can become an encumbrance in a dog-eat-dog world. In a purely\ntransactional society, people who are not weighed down by any considerations for others\ncan move around more easily and are likely to come out ahead” <\/em>(p.75). <\/p>\n\n\n\n Soros does not realise just how fundamental a criticism of capitalism this is. Although\nhe rightly says that “a purely transactional society”, in which the only links\nbetween people would be monetary, “could never exist”, the market\nfundamentalists are equally right to insist that the logic of capitalism is to work\ntowards this\u2014they are just crazy in thinking that this nightmare situation is the\nideal form of society. <\/p>\n\n\n\n Soros’s mistake is to think that you can have capitalism and somehow keep its\nmoney-commodity relations from spreading everywhere. The history of capitalism is the\nhistory of the continuous spread of such transactional relationships\u2014i.e., the\nmarket\u2014into more and more fields of human activity. It is a process that cannot be\nstopped within capitalism as growing marketisation is just as much a feature of capitalism\nas capital accumulation; indeed the two go together. <\/p>\n\n\n\n Soros, however, is a supporter of capitalism: <\/p>\n\n\n\n “I want to make it clear that I do not want to abolish capitalism. In spite of\nits shortcomings, it is better than the alternatives. Instead, I want to prevent the\nglobal capitalist system from destroying itself” <\/em>(Introduction). <\/p>\n\n\n\n We doubt whether he has given serious consideration to the alternative of a global\nsociety based on the common ownership of the world’s resources and production directly to\nsatisfy human needs. Not that we would really expect him to. Some of his\nfellow-capitalists already think he has gone too far in his criticism of their system. <\/p>\n\n\n\n Author: A.L.B.<\/p>\n\n\n\n Please email your comments about this article to feedback@worldsocialism.org<\/a><\/p>\n\n\n\n Back to the Economics Index<\/a><\/p>\n\n\n\n
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Creeping marketisation<\/strong> <\/h3>\n\n\n\n
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