Capitalism has failed us or have we failed capitalism?

By The Truth Reporter:

The picture of capitalism that its advocates paint is a society in which everyone is working to innovate, produce and compete, these effects produce a stream of products that people want to buy, the cycle becomes self-sustaining and expands organically – improving the wealth and wellbeing of all those who participate.

Fast forward to today. The main topic of discussion in my household this morning is where our next roll of toilet paper is coming from.  Having resisted the temptation to stockpile at the outset of the COVID19 outbreak we now need more. Problem is there is none to be bought. 

Like most ideologies, capitalism in practice is not the panacea that its leading proponents suggest and like all systems, it has its flaws.  Adam Smith’s hidden hand cannot provide the massive numbers of toilet rolls that people wish to buy right now and logically it shouldn’t have to. You can only use so much toilet roll and there will come a point where people simply cannot store any more and demand will drop. 

This knowledge does not improve the situation at my local supermarket.  People everywhere are saying the same thing ‘what is the government going to do about it?’  The truth is that in a capitalist society it is not the government’s job to decide how many toilet rolls are available where and to whom. Classical economics dictates that when demand rises and supply remains constant then prices should rise to restore the equilibrium.  If toilet paper rises for £5 a roll people will only buy what they absolutely need. Of course if retailers did this there would be cries of ‘profiteering’ and howls of derision all over social media. So essentially we want capitalism to provide for all our needs but we cannot allow one of its most basic mechanisms to operate. 

We must quickly come to terms with our expectations, we are a society that wants everything now and we don’t want to wait. We want to tap a screen and have food delivered to our door. We want to have our diseases cured and our broken bones set so we can get back onto the treadmill. The problem is that all these interconnected systems have become so tangled and interwoven that a breakdown of one starts to produce failures elsewhere. 

Nowhere is this dynamic more overt than in the financial system. Stock prices are fluctuating wildly as traders try to react to the incoming news minute by minute. This is happening in a context where the stability of the system is also dependent upon prices. Again, this is not true capitalism as the market is not being allowed to correct itself as the Federal Reserve and other state actors are intervening in the markets with massive injections of liquidity to maintain prices. 

The 2008 financial crash was ‘solved’ by granting the banks huge bailouts to cover the losses they had made buying toxic and worthless assets. The problem is that now that event is twelve years in the past and not one single lesson has been learned from those events.  Central banks think they can stimulate the economy by lowering interest rates to zero, essentially making saving money a loss-making exercise and forcing spending into the present. 

So we have some very powerful people who really don’t understand all they hold in their hand is a piece of wet spaghetti when in fact they needed an iron rod. The saddest thing of all is that there are no easy solutions. To continue the gastronomic analogies the current quasi-capitalist morass we know as the globalised economy is an omelette when in fact we wanted a boiled egg.  The only way we are going to progress from this point is to recognise that no matter how much garnish you put on the plate no chef can unscramble the eggs. Some has to have the courage to throw it all in the bin and start again – even if the customer is angry about the delay.

Some theorists and commentators are claiming that the current crisis is a smokescreen for the largest financial reset in human history and they might well be right. What is certain is that there is more than one interest group trying to direct these events to suit their agenda and that many more are cynically looking at how they can use the chaos for profit or advancement. 

As I complete this article the VIX index has failed to open and markets in Europe are in meltdown.  People may need to prepare for the possibility that governments no longer have the expertise or the wherewithal to stop the economic impact of the COVID19 and you might very well be on your own.

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