FT - Unsustainable Global Capitalism About to Collapse?

**Tom Sawyer** · 07-02-2011, 09:54 AM

Unconventional Wisdom

A special anniversary report challenging the world's most dangerous thinking. - FT Foreign Policy Magazine (Jan/Feb 2011 Edition)

Immanuel Wallerstein
THE GLOBAL ECONOMY WON'T RECOVER, NOW OR EVER

Virtually everyone everywhere-economists, politicians, pundits -- agrees that the world has been in some kind of economic trouble since at least 2008. And virtually everyone seems to believe that in the next few years the world will somehow "recover" from these difficulties. After all, upturns always occur after downturns. The remedies recommended vary considerably, but the idea that the system shall continue in its essential features is a deeply rooted faith.

But it is wrong. All systems have lives. When their processes move too far from equilibrium, they fluctuate chaotically and bifurcate. Our existing system, what I call a capitalist world-economy, has been in existence for some 500 years and has for at least a century encompassed the entire globe. It has functioned remarkably well. But like all systems, it has moved steadily further and further from equilibrium. For a while now, it has moved too far from equilibrium, such that it is today in structural crisis.

The problem is that the basic costs of all production have risen remarkably. There are the personnel expenses of all kinds -- for unskilled workers, for cadres, for top-level management. There are the costs incurred as producers pass on the costs of their production to the rest of us -- for detoxification, for renewal of resources, for infrastructure. And the democratization of the world has led to demands for more and more education, more and more health provisions, and more and more guarantees of lifetime income. To meet these demands, there has been a significant increase in taxation of all kinds. Together, these costs have risen beyond the point that permits serious capital accumulation. Why not then simply raise prices? Because there are limits beyond which one cannot push their level. It is called the elasticity of demand. The result is a growing profit squeeze, which is reaching a point where the game is not worth the candle.

What we are witnessing as a result is chaotic fluctuations of all kinds -- economic, political, sociocultural. These fluctuations cannot easily be controlled by public policy. The result is ever greater uncertainty about all kinds of short-term decision-making, as well as frantic realignments of every variety. Doubt feeds on itself as we search for ways out of the menacing uncertainty posed by terrorism, climate change, pandemics, and nuclear proliferation.

The only sure thing is that the present system cannot continue. The fundamental political struggle is over what kind of system will replace capitalism, not whether it should survive. The choice is between a new system that replicates some of the present system's essential features of hierarchy and polarization and one that is relatively democratic and egalitarian.

The extraordinary expansion of the world-economy in the postwar years (more or less 1945 to 1970) has been followed by a long period of economic stagnation in which the basic source of gain has been rank speculation sustained by successive indebtednesses. The latest financial crisis didn't bring down this system; it merely exposed it as hollow. Our recent "difficulties" are merely the next-to-last bubble in a process of boom and bust the world-system has been undergoing since around 1970. The last bubble will be state indebtednesses, including in the so-called emerging economies, leading to bankruptcies.

Most people do not recognize -- or refuse to recognize -- these realities. It is wrenching to accept that the historical system in which we are living is in structural crisis and will not survive.

Meanwhile, the system proceeds by its accepted rules. We meet at G-20 sessions and seek a futile consensus. We speculate on the markets. We "develop" our economies in whatever way we can. All this activity simply accentuates the structural crisis. The real action, the struggle over what new system will be created, is elsewhere.

Immanuel Wallerstein is a senior research scholar at Yale University.

Jonas Bendiksen/Magnum Photos

**Kurgen** · 07-02-2011, 10:03 AM

oh dear

**spliff** · 07-02-2011, 12:27 PM

I can't agree.

**Thormaturge** · 07-02-2011, 12:38 PM

What we are currently confronted with is an energy crisis.

The current means of generating power is unsustainable.

Eventually we will figure out how to replace fossil fuels with a combination of solar energy, wind power and other means.

Then we can use oil as a lubricant and for other non-energy related purposes.

We can also go back to growing crops for food instead of biofuel.

The sky isn't falling, but the world beneath it is changing.

**shadow role** · 07-02-2011, 01:18 PM

the Reserve Bank ,and fractional reserve banking have caused a crisis in debt and the relationship of productivity to money supply.Plugging a dam about to burst with quantitative easing will not succeed .Economic chaos ,on the horizon.as the obvious reality that debt is not an asset becomes painfully evident.

**HermantheGerman** · 07-02-2011, 02:01 PM

We are all hanging on a infusion.
The infusion that we are hanging on is called oil. And as we all know its getting expensive and the supply/ demand is dramatic.

**wefearourdespot** · 07-02-2011, 02:24 PM

Originally Posted by Tom Sawyer

Immanuel Wallerstein is a senior research scholar at Yale University.

No wonders USA are going down the drain if they keep to pay such morons and label the wasted money as "investment in research"

**wefearourdespot** · 07-02-2011, 02:32 PM

Originally Posted by Tom Sawyer

And the democratization of the world has led to demands for more and more education, more and more health provisions, and more and more guarantees of lifetime income. To meet these demands, there has been a significant increase in taxation of all kinds.

How wrong.
What people asks all over the globe is not services provided "for free" by the state but less taxes so that everyone can afford to purchase education and health as he sees fit. It's the state the one always seeking for new excuses to raise taxes to feed his hangers and therefore sticks down the throat of his citizens always new "services" ,and it's indeed this the reason western countries are going bankrupt.
But this is socialism, not capitalism.
Capitalism is not a system, it's just the realization of how nature works.
Those who understand it prosper, those who impose socialism on their slaves to rob them blind doom them to misery.

**Johnny Longprong** · 07-02-2011, 02:38 PM

Originally Posted by Tom Sawyer

agrees that the world has been in some kind of economic trouble since at least 2008

Oh duh!!!!

**shadow role** · 07-02-2011, 02:51 PM

Originally Posted by wefearourdespot

Originally Posted by Tom Sawyer

And the democratization of the world has led to demands for more and more education, more and more health provisions, and more and more guarantees of lifetime income. To meet these demands, there has been a significant increase in taxation of all kinds.

How wrong.
What people asks all over the globe is not services provided "for free" by the state but less taxes so that everyone can afford to purchase education and health as he sees fit. It's the state the one always seeking for new excuses to raise taxes to feed his hangers and therefore sticks down the throat of his citizens always new "services" ,and it's indeed this the reason western countries are going bankrupt.
But this is socialism, not capitalism.
Capitalism is not a system, it's just the realization of how nature works.
Those who understand it prosper, those who impose socialism on their slaves to rob them blind doom them to misery.

can't agree at all.The cornerstone of Capitalism is maintaining inequality.The catchcry of the GFC is privatise profits and socialise losses.The bailouts of private enterprise by govt reveal that the Capitalist model does NOT WORK.Same for pure communism.Socialism ,Swedish style is the most compelling 'happy medium'.Whilst survival of the fittest may be how 'nature works'...modern society relies on productivity/labour to progress.Unequal allocation of resources eventually leads to revolution.These are interesting times.

**harrybarracuda** · 07-02-2011, 03:12 PM

Doubt feeds on itself as we search for ways out of the menacing uncertainty posed by terrorism, climate change, pandemics, and nuclear proliferation.

Not one mention of overpopulation. No mention of the slave-like labour costs in Asia undermining wages in the west. No mention of billions of hangers on in non-producing countries migrating to the west and becoming a drain on their economies.

I think they're missing a very big fucking point indeed.

There are already too many people, but you can let 20,000,000 kids die a year in India because they're producing a net surplus even after that.

Indian Population Clock

**shadow role** · 07-02-2011, 03:32 PM

Originally Posted by harrybarracuda

Doubt feeds on itself as we search for ways out of the menacing uncertainty posed by terrorism, climate change, pandemics, and nuclear proliferation.

Not one mention of overpopulation. No mention of the slave-like labour costs in Asia undermining wages in the west. No mention of billions of hangers on in non-producing countries migrating to the west and becoming a drain on their economies.

I think they're missing a very big fucking point indeed.

There are already too many people, but you can let 20,000,000 kids die a year in India because they're producing a net surplus even after that.

Indian Population Clock

blaming the poor Barry!Unbelievable ....the poor are merely appeased in the west.Western materialism is the old feudal system dressed up in new clothes.Look to globalisation and the wantmakers, brainwashing people that are taught to strive for things they do not need.American monetary policy is the root cause of unrest and crisis around the world.

**Butterfly** · 08-02-2011, 12:48 AM

China will be the next economic bomb and it's not going to be pretty

there is now a consensus prediction by non-mainstream analysts that China will implode.

of course, like the subprime, their calls will be ignored until it is too late

**StrontiumDog** · 08-02-2011, 12:11 PM

What is needed is massive investment in sustainable/renewable energy sources, land use changes (such as reversing the massive desertification that has taken place for centuries, projects exist to do just this) to grow crops and an awareness that capitalism is fine for the rich, but not for everyone else...so it is failed system as is.

A huge move away from oil would be nice too.

Also as regards other resources such as the various elements that are in massive demand (copper for example), we are going to have to look elsewhere, as this planet has a finite quantity of such things and they are going to run out (another failing of the 'capitalist' system....exploit today, forget about tomorrow)

Huge adjustments are required, but they are very costly (see above) and the capitalist system as it is wont work, as many of these projects would be tremendously expensive and a return on the initial investment might be decades away.

Human greed knows no bounds....

As a species we have evolved and invented continuously and survived. However, the real challenges are yet to occur....and another 300,000 new lives will come into existence today. And then again tomorrow....capitalism is not going to cope with all of these challenges. However, there are many who don't want to give it up....instant gratification is just wonderful, right?

Sobering stats....watch and cringe....

Worldometers - real time world statistics

(the 7 billion people on this planet mark is going to be reached very soon....)

**Lorenzo** · 08-02-2011, 12:41 PM

Originally Posted by Tom Sawyer

The problem is that the basic costs of all production have risen remarkably. There are the personnel expenses of all kinds -- for unskilled workers, for cadres, for top-level management. There are the costs incurred as producers pass on the costs of their production to the rest of us -- for detoxification, for renewal of resources, for infrastructure. And the democratization of the world has led to demands for more and more education, more and more health provisions, and more and more guarantees of lifetime income. To meet these demands, there has been a significant increase in taxation of all kinds. Together, these costs have risen beyond the point that permits serious capital accumulation. Why not then simply raise prices? Because there are limits beyond which one cannot push their level. It is called the elasticity of demand. The result is a growing profit squeeze, which is reaching a point where the game is not worth the candle.

There you have it.

We are witnessing the beginning of this transition as US States are crushed by bloated union wages and (unearned) pensions. The developed world will fall first if this guy's logic is correct.

As always the question is what to do to protect one's ass and assets.

**HermantheGerman** · 08-02-2011, 12:41 PM

Originally Posted by Butterfly

China will be the next economic bomb and it's not going to be pretty

there is now a consensus prediction by non-mainstream analysts that China will implode.

of course, like the subprime, their calls will be ignored until it is too late

I've been hearing this for the last 10 years from the wall street experts and pulled my money out of china oil.....what a big fu*king mistake. I'am not saying that it is not going to happen......but when pleeeeease.

Overpopulation is of course a main factor.

**benbaaa** · 08-02-2011, 12:52 PM

Jeeze, amazing to thinks that unlimited expansion inside a limited system is somehow a flawed model.

**Butterfly** · 08-02-2011, 05:40 PM

Originally Posted by HermantheGerman

I've been hearing this for the last 10 years from the wall street experts and pulled my money out of china oil.....what a big fu*king mistake

yes and no, reduced your exposure would have been wiser, it's all about risk control

Originally Posted by HermantheGerman

but when pleeeeease.

that's impossible to say, that's the problem, and it becomes a gamble. The real question is can you sustain such a gamble ? some people can, others can't

**wefearourdespot** · 08-02-2011, 11:38 PM

Originally Posted by Lorenzo

As always the question is what to do to protect one's ass and assets.

Quite simply avoid decrepit countries currencies denominated assets like plague.

**Thormaturge** · 09-02-2011, 01:34 AM

Originally Posted by HermantheGerman

pulled my money out of china oil.....what a big fu*king mistake.

Seriously?

The Chinese are desperate for oil.

As a declining resource with increasing demand the price can only increase at least for the forseeable future.

If you want a good long-term bet (15-20 years) go for glass manufacturers and other products that manufacture an oil/plastic replacement.

Companies involved in recycling are another good bet as minerals become harder to mine. The mining companies will simply go bust.

**Muadib** · 09-02-2011, 04:15 AM

Originally Posted by HermantheGerman

Overpopulation is of course a main factor.

Indeed... Just look at the run-up in commodity prices over the last 6 months... Cooper, silver, rare earth metals, iron ore, cotton, soy beans, rice, oil, wheat, sugar, etc... All on the rise... Too many people and not enough natural resources...

**Tunaka** · 09-02-2011, 11:17 AM

Originally Posted by Muadib

Originally Posted by HermantheGerman

Overpopulation is of course a main factor.

Indeed... Just look at the run-up in commodity prices over the last 6 months... Cooper, silver, rare earth metals, iron ore, cotton, soy beans, rice, oil, wheat, sugar, etc... All on the rise... Too many people and not enough natural resources...

What this will lead to is (as we know) protests, instability, change in governments, and crime.

The question is, are these rising commodity prices a short term issue, or is this what we will see for the longer term?

**Butterfly** · 09-02-2011, 11:26 AM

Originally Posted by Muadib

Too many people and not enough natural resources...

actually not really true,

the way Futures are organized, commodities are priced using certain financial techniques to take into account certain risk. When that risk is high or "volatile" it creates "speculative" discrepancies that market participants will exploit

For example, currently the Spot for oil is below the Futures for Oil, which reflects a contango situation, that is "buyers" are covering their risk of not being delivered in the future by "overpaying"

This means that if you sell a Futures Oil contract, you have a guarantee return at maturity of that contract since the Spot will be below the value of your Futures contract, that is you will buy at the Spot and deliver immediately at the higher sale price of the Futures.

Isn't this great ?

**Thaihome** · 17-02-2011, 02:30 PM

Originally Posted by Muadib

Originally Posted by HermantheGerman

Overpopulation is of course a main factor.

Indeed... Just look at the run-up in commodity prices over the last 6 months... Cooper, silver, rare earth metals, iron ore, cotton, soy beans, rice, oil, wheat, sugar, etc... All on the rise... Too many people and not enough natural resources...

So, just in the last six months over-population became a problem and is now reflected in the demand for commodities and their price? Back in 2008 when they were at their lowest in many years, I guess there was not an overpopulation problem?

TH

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