The publications of Cambridge economist Ha Joon Chang on recent economic history are relevant to the points you make here. Chang is an economist who favours capitalist over socialist macroeconomic theory but is not as enthusiastic about neoliberalism, an ideology that has held sway over the last few decades in many parts of the world.
Chang basically demonstrates in his writing that economic growth in the advanced capitalist countries has actually been
lower over the last 40 years (when various versions of free market capitalism have held sway: Thatcherism, 'Trickle-down' Reaganomics, Clinton's Market Globalism and Tony Blair's Third Way) than it ever was between 1950 and 1970 (when 'socialist' Keynesian economics ruled the roost), or even during the late 70's period of stagflation (which you mentioned above) which resulted in the monetarist policies of Friedman and Hayek getting adopted.
Let’s run with an example. Thatcher got elected on the back of the Saatchi slogan 'Labour Isn't Working'. This is because there was, at that time, one million unemployed in the UK. For Friedman and Hayek (the economists whose policies provide the foundation for neoliberalism), the focus of macreconomic theory should be on controlling inflation. So Thatcher raised interest rates. This should lower demand as it then costs more to borrow money. Unfortunately, those higher interest rates attracted foreign capital, driving up the value of the British pound and making British exports uncompetitive.
The result was a huge recession. Unemployment soared to 3.3 million people, a significant chunk of British manufacturing was destroyed, and many traditional industrial centres were devastated.
Reaganomics didn't work either. As in the UK, interest rates were jacked up in an attempt to reduce inflation. Between 1979 and 1981, interest rates more than doubled from around 10% to over 20% per year. A significant proportion of the US manufacturing industry, which had already been losing ground to Japanese and other foreign competition, could not withstand such an increase in financial costs. The traditional industrial heartland in the Midwest was turned into 'the Rust Belt'.
Neoliberals subscribe to what is known as the D-L-P formula (Deregulation of the economy, Liberalisation of trade and industry, Privatisation of state owned enterprises). Financial deregulation in the US at this time laid the foundation for the unstable and morally egregious financial system we have today, which involves hostile takeovers, asset stripping, and so on. To avoid this fate, firms at the time of Reagan had to deliver profits faster than before, otherwise impatient shareholders would sell up, reducing the share prices and thus exposing the firm to a greater danger of takeover. The easiest way for a company to deal with this was through downsizing, reducing the workforce, cutting overheads and minimizing investments, even though these actions diminish the competitiveness of the business in the longer term.
Here's a damning statistic from Chang: '...distributed profits as a share of total US corporate profits stood at 35-45 per cent between the 1950's and 1970's. Between 2001 and 2010, the largest US companies distributed 94% of their profits [to shareholders] and the top UK companies 89% of their profits.'
And here's another: '...in the UK, the average period of shareholding, which had already fallen from 5 years in the mid 1960's to two years in the 1980's, plummeted to about 7.5 months at the end of 2007.'
The D-L-P formula has also proved disastrous for developing economies too. One of the latest examples is India (often held up as a neoliberal economic success story) where 250,000 farmers have committed suicide because of what the novelist Arundhati Roy has called the 'Privatisation of Everything.' For the back story on that, read her recent book
Capitalism: A Ghost Story.
Let's also consider the instability of the financial markets that has been a consequence of the deregulation of them.
Start of 1990's - banking crises in Sweden, Finland and Norway
1994/95 - 'Tequila' crisis in Mexico
1997 - crises in 'miracle' economies in Thailand, Indonesia, Malaysia and South Korea
1998 - Russian crisis
1999 - Brazilian crisis
2002 - Argentina
2008 - We all know about that one
Virtually no country was in banking crisis between the end of the Second World War and the mid-1970's, when the financial sector was more regulated. Between the mid-1970's and the late 1980's, the proportion of countries who experienced a banking crisis rose to 5 to 10%, weighted by their share of world income. The proportion then shot up to around 20% in the mid-1990's. The ratio then briefly fell to zero for a few years in the mid-2000s, but went up again to 35% following the 2008 global financial crisis.
There's one other interesting angle on this.
In his global history of ethics
The Quest for a Moral Compass, Kenan Malik observes that:
‘By 2008…the possibility of change, at least in the way that Marx would have understood it had become negligibly small. The depth of the economic crisis led to talk of ‘a crisis of capitalism’. And yet there was no political challenge to capitalism. Worker’s organisations had been destroyed, the left had imploded, as had the idea that there could be an alternative to the market system. The resurrection of Marx challenged none of this. Those who turn to Marx these days look upon him not as a prophet of capitalism’s demise but as a poet of its moral corruption.’
So given that socialism is no longer regarded as a viable alternative to neoliberal ideology, what does that leave?
Curiously, it leaves religion.
Several modern philosophers/left wing theorists (Slavoj Zizek, Alain Badiou and Terry Eagleton), seem to be drawing on theology in an attempt to revivify socialism in some of their publications. Here's the cover to one of them.
In reply to a private e-mail enquiry I sent him about this, one eminent teacher of Philosophy and Theology at a UK university put it this way:
“You are right to detect a strange shift – radical European philosophers drawing on Christian ideas to critique capitalism. This has opened up new ground – there have always been Christian critiques of capitalism, but it now seems possible to work on neutral philosophical ground, engaging with secular thinkers.”
Those in the vanguard of the phenomenon known as Engaged Buddhism is also taking a similar line.
The following is taken from Matthieu Ricard's extraordinary and multidisciplinary study
Altruism: The Power of Compassion to Change the World. Just the very title is an indication that we are a long way from the naive assumptions about human nature indulged in by supporters of free-market capitalism.
'Much economic policy-making from that angle is based on the model of homo economicus - the view that humans are narrowly individualistic, rational but self-interested creatures. Unsurprisingly, hundreds of pages of Ricard's study are devoted to demolishing this model, and along the way the author draws on a vast range of multidisciplinary research to do so. But my concern here is not with these studies. Suffice it to say that even Adam Smith, the father of the market economy, was not nearly so extreme as his successors in taking the aforementioned view of humanity.
In a work which has not attracted quite so much attention as The Wealth of Nations, Smith stated: 'To restrain our selfish, and to indulge our benevolent affections, constitutes the perfection of human nature; and can alone produce among mankind that harmony of sentiments and passions in which consists in their whole grace and harmony.'
In other words, any theory of economics that excludes altruism is fundamentally incomplete and diminished.
But anyway, here is Ricard, writing in 2013:
'We have already seen how in the United States the richest 1% of the population currently owns 40% of the country's wealth, compared with just 13% of it twenty-five years ago...such a level of inequality is morally unjustifiable and is a scourge on society. What's more, contrary to the claims of neoliberals, the wealth at the top of the ladder remains there, and does not 'trickle down' to the bottom to create a more dynamic society for all.
As Joseph Stiglitz explains, inequality is both the cause and consequence of the failure of the political system, and it contributes to the instability of the financial system, which in turn contributes to increased inequality. It is this vicious cycle that has thrown us into the abyss, and we will only be able to emerge from it by reforming the system.'
And there's more:
'The divide in the United States is widening faster and faster. For thirty years, 90% of Americans saw their income increase by just 15%, while those who make up the wealthiest 1% experienced a leap of 150%. Between 2002 and 2007, this 1% of the population monopolized over 65% of national income gains. While the best-off became considerably richer, the situation for the majority of Americans got worse.
In Europe, although income inequality is overall lower than it is in the United States, it is on the rise. The most equal countries are those in Scandinavia, where the richest 10% earn just six times more than the poorest 10%.
Research carried out by economists at the IMF suggests that almost everywhere in the world, income inequality slows growth and triggers financial crises...The 2014 report from the OECD concludes that the gap between rich and poor is at its highest level in 30 years in most OECD countries. Today, the richest 10% of the population in the OECD area earn 9.5 times more than the poorest 10%...This long-term trend increase in income inequality has curbed economic growth significantly, chiefly because of families with low incomes not being able to invest in their education.'
Ricard then goes on to discuss China ('an oppressive totalitarian regime - notably, and unusually at the same time as being a capitalist state since the 1990's')where
'the poorest people's wages increased proportionately even more so than those of the richest. Yet immense fortunes have been amassed among the wealthiest, often thanks to nepotism within the leadership and due to wholesale corruption.'
'What's more, in all countries studied, in times of economic crisis, the elite classes almost always come out alright, while people with low incomes are affected disproportionately. The wealthiest also benefit much more than anyone else when the economy recovers. Women for their part earn just 10% of global income, despite carrying out two-thirds of humankind's work.
Tax and protection schemes, which play a major role in easing the levels of inequality brought about by free market capitalism, have in many countries ceased to be effective over the last fifteen years, since libertarian capitalism aims at reducing the role of government and at reducing social welfare as much as possible.'
The section I have been quoting from finishes with the words of Warren Buffet:
'There's been class warfare going on. And my class has won.'
Interestingly, Ricard is a Tibetan Buddhist who a) serves as a translator for the Dalai Lama and b) has been described as 'the happiest man alive' as a result of neuroscientific studies of the unusual brain activity that decades of meditation seem to have produced in him.
"The scans showed that when meditating on compassion, Ricard’s brain produces a level of gamma waves – those linked to consciousness, attention, learning and memory – ‘never reported before in the neuroscience literature’...the scans also showed excessive activity in his brain’s left prefrontal cortex compared to its right counterpart, allowing him an abnormally large capacity for happiness and a reduced propensity towards negativity."
Maybe he knows something that we don’t.
My other reason for mentioning Ricard is because I don't agree with your point that we are no longer a 'compassionate country'. This tendency has only been suppressed. Ricard spends several chapters of his book drawing attention to the fact that empathy and altruism, or helping behaviour if you like, are products of evolution by appealing to a range of studies that highlight this aspect of human nature (children exhibit it spontaneously and so do many species of animals).
There's one other point that you made that I would also take issue with, namely, that you don't seem to acknowledge the presently fissiparous nature of right-wing politics. I have been wondering to myself whether the present friction within, say, the Republican party in the USA and the Conservatives in the UK, has come about because two toxic versions of capitalism are rubbing up against each other.
On the one hand, there is the neoliberal variety, as described above and advocated by, say, Hayek (much admired by Thatcher), Friedman, and the philosopher Robert Nozick, but also practised by both New Labour and the EU up to a point.
The fact that the ideology driving it demands the free movement of labour across borders has, in my view, provoked tribalistic concerns about foreigners and a fear of 'the Other' instilled by evolutionary psychology (hence all the racists who voted 'Leave'), as well as more rationally grounded anxieties about the consequences of untrammelled immigration.
In turn this has given rise to another toxic version of capitalism based on a nationalistic form of identity politics. John Major envisaged a more benign version of this in his famous speech based on "long shadows on county grounds, warm beer, invincible green suburbs, dog lovers and pools fillers and – as George Orwell said – 'old maids bicycling to holy communion through the morning mist'."
I suspect that when those Tories who subscribe to this pastoral version of Britishness sing 'Jerusalem' (whilst failing to note that the second verse is replete with Freudian sexual symbolism) they have something like this is mind. It's certainly a lot different to those more lurid patriotic fantasies festering in the imaginations of fellow travellers like the supporters of Tommy Robinson.
So there's plenty of scope for friction. And that's before you even get to the popular resentment of what is perceived to be an an out-of-touch, liberal elite.
It's a shame that these two versions of capitalism are in the ascendant right now as the latter one is a cure that is worse than the disease in my view. But although capitalism has been and still is rampantly exploitative, I don't see this as something inevitable. I am probably naive but I do think a more ethical form of capitalism is possible.
