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The Socialist Myth that is Late Stage Capitalism

Late Stage Capitalism is a myth that socialist thinkers have used to try to bring down the capitalist system.

By Sean Calvert | Canada

Late stage capitalism, or late capitalism, is an idea that has re-emerged in recent years to explain the purported failures of contemporary capitalism. According to this notion, absurdities and failures in the economy are symptomatic of capitalism’s death throes. These perceived failures, however, are not inherent to the system, as many Marxist economists believe, but are rather due to intervention by the state. As for the absurdities, none provide evidence that capitalism is failing.

While Marx himself never used the term late stage capitalism, he did describe what the final stages of capitalism would look like. In volume three of Das Kapital, Marx described how in capitalism’s last stage, market competition would decline as capital centralized in fewer hands. Marxist economists, such as Michał Kalecki, believed that capitalism was inherently monopolistic and that its fate was to move towards a system that would eventually devour itself.

The term “Late Capitalism” can be traced back to Marxist economist Werner Sombart’s work Der moderne Kapitalismus, published in the early 1900s. In this work, Sombart explains that Capitalism developed in three stages: early (pre-industrial revolution), high (the industrial revolution), and late stage capitalism (World War I and beyond).

The term was popularized seventy years later by another Marxist economist, Ernest Mandel. For Mandel, Late Capitalism is characterized by the rise of multinational corporations, consumerism, and globalization. He argued that the last expansionary wave began with the birth of fascism in Europe and the advent of the US and UK command economies during the Second World War. This expansion lasted until 1972 when it reached its limit. Economic stagnation and class struggle followed.

When Mandel was writing, he was witnessing the very end of the post-WWII boom. He believed that the working class would soon rise in a mass, revolutionary movement.  Obviously, this did not happen. The slump did not create anything resembling the conditions that sparked the revolutions in Tsarist Russia.

Contemporary understandings of Late Capitalism have broadened out from the original definition to include all the deficiencies and absurdities of the current economy. These include the destruction of the middle class, the growing gap between the rich and poor, and popular focus on useless goods, such as wifi-enabled kettles.

The “late” in “late capitalism” implies that capitalism is at the end of its age.  Just as Late Antiquity marked the end of the Classical era and the transition to the Middle Ages, so too does late stage capitalism herald both an end and a beginning. Marx believed that the final stages of capitalism would be marked by the rise of the proletariat and the diminishment of the middle class as wealth was concentrated into fewer hands. These three factors, according to Marx, would result in the emergence of a proletarian revolution. Yet history proved otherwise. Crises, such as the Great Depression, came and went, yet there was no revolution.     

Marx predicted that the advent of monopolies would signal the collapse of capitalism. While it is true that large corporations came to control the economic landscape, their dominion is not natural. Economist Horace Gray found that aspiring monopolies would petition governments to designate them as public utilities to protect them from competition. AT&T enjoyed monopoly status until its government supplied patents expired in 1893. By 1907, AT&T’s competitors controlled 51% of the market.

Income inequality is touted as one of the elements of late stage capitalism. Inequality is not necessarily a bad thing – it exemplifies the choice of the individual in a capitalist society. One person may choose to be a schoolteacher and another become a doctor. The income gap between the two is no doubt large, but the two individuals made different choices, leading to different outcomes.

On the other hand, the wealth gap between the rich and poor in the U.S. is growing at an alarming rate. A Bloomberg article found that between 2010 and 2015 the average annual income between the top 20% and the bottom 20% increased by more than $29,000 to $189,000. New York Times columnist David Brooks reports that wealth inequality is greater in the United States than it is in Iran or Russia. Surely this must be a sign that capitalism is in its final stages.

While this is true, the major reason for the channeling of wealth to the super rich is due to collusion among the state, large corporations, and special interest groups. It is called cronyism, and it is inherently against the precepts of free-market capitalism. Corporations lobby the government to create policies, which range from subsidies to protective regulations, which in turn create barriers for new competitors, effectively killing most competition and funneling wealth up the rungs of the socioeconomic ladder. It is not capitalism per se that has funneled the wealth to the top, but the state and its regressive regulations.

It must not be forgotten that capitalism allows more upward social mobility than alternative economic systems. “Oh, but the middle class is shrinking! Marx predicted this!” No doubt this is true in the United States. A Pew Research study showed that between 1991 and 2010 middle-income households fell to 59% from 62%.

Yet acording to the U.S. Census Bureau, since 1967, the number of households which have an income of more than $100,000 has increased from 8.1% to 27.7%. In addition, the number of low-income households, defined as those that make less than $35,000, has decreased from 38.7% to 30.2% since 1967. From these statistics, we can conclude that most households are moving up rather than down the income ladder, contrary to what Marx predicted.

Some who believe that we are in late stage capitalism point towards absurdities and irregularities within our socio-economic system. A $1200 margarita is touted as evidence of decadence. Yet a $1200 margarita undeniably targets the exceedingly rich, and should be regarded as a non-issue because consumers have the choice to pursue lower priced margaritas.

Critics of capitalism fail to recognize is that most of capitalism’s perceived shortcomings are, in fact, not intrinsic the economic system. Rather, they are consequences of the anti-capitalist policies of the state that constrict the free market, and in doing so, give rise to the perception that capitalism is on its deathbed.

Mandel waited from 1973 until his death in 1995 for the proletariat to revolt. Yet his wait was in vain.  If capitalism is as unsustainable and as exploitative as many Marxists make it out to be, we would have already seen a revolution akin to the overthrow of Tsarist Russia. For now, and the foreseeable future, free-market capitalism remains the best economic system we have.


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3 comments on “The Socialist Myth that is Late Stage Capitalism

  1. Marx didn’t care so much about wealth inequality; he didn’t believe everyone should be compensated the same regardless of the work they did. He also admired capitalism, for all the reasons I’m sure the author does too. (Neither did he describe what “communism” would look like, other than the abolition of the exploitative class structure of the modern world).

    No, it was his observations of the alienation of labor under capital, as well as capitalism’s ceaseless, malignant growth drive at the expense of all else, that informed his (increasingly relevant) critique.

    Of course, the author seeks to build a straw man, or more likely never took the time to actually understand Marx, or the many thinkers who have expanded on his work.

    This opinion piece has the intellectual weight of a bumper sticker.

  2. Pingback: El mito socialista que habla del capitalismo tardío - MÁS Libertad

  3. Your numbers about household incomes rising doesn’t take inflation into account

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