ISSN (Online) - 2349-8846
-A A +A

The Future of Capitalism

Dhruba Narayan Ghosh ( is former chairman, State Bank of India. He is managing trustee, Sameeksha Trust, which owns the EPW.

How Will Capitalism End? Essays on a Failing System by Wolfgang Streeck, New Delhi: Juggernaut Books, 2017; pp 272, 499 (paperback).

A crisis looms at the very heart of the global capitalist system today. However, crises are not new in the history of capitalism. Since the middle of the 18th century, modern societies, though dramatically shaped by capitalism, have witnessed periodic crises that often threatened their very existence. Over time, different theories have emerged seeking to explain why such setbacks to growth and stability occur at an unnerving frequency. Is it a tendency of the rate of profit to fall (Marx), or the saturation of needs and markets (Keynes), or exhaustion of new land for colonisation (Rosa Luxemburg), or technological stagnation (Kondratieff)? Interestingly, whatever the differences in their theoretical constructs, all of them agreed that capitalism was bound to end sometime, if not in their lifetimes.

These predictions have not come true. In every crisis, the capitalist order has been successful in rescuing itself mainly through exogenous support. In the early 20th century, World War I virtually converted capitalism into a public utility for enhancing the collective capacities of nations. The years following the Great Depression saw the process of capital accumulation being protected in several countries in Europe through authoritarian social and political orders. After World War II, several democratic governments initiated policies largely aimed at preserving a kind of economic stability and social justice within the framework of capitalism. From the 1970s, however, capitalism had been stumbling over several mini-crises leading to the near-collapse in 2008.

It is this contemporary phase of capitalism that engages the author, Wolfgang Streeck. Through a series of essays and addresses, published or delivered during the first few years of this decade, and compiled in this book, the author gives us an insight into the nature of the current crisis and speculates about the future of capitalism. His conclusion is that capitalism is now plagued by “deep indeterminacy and uncertainty,” and several endemic contradictions and disorders, with no escape routes in sight.

Democratic capitalism, as established after World War II in North America and Western Europe, enjoyed uninterrupted economic growth for the next two decades. Christened as mixed economy or social market economy, it flourished on the strength of several policies and institutions that were designed to protect societies from a repetition of the disasters of the 1930s. First, capitalists recognised that the system could not have stability unless the poorer sections of societies were ensured certain basic benefits and the cost of these burdens was shared by them. Second, politicians realised that markets should be allowed to flourish to help the real economy grow. Third, if the market behaved in a way that endangered the stability of the system, the state had to be equipped, institutionally and technically, to set matters right. Fourth, the organised working class accepted capitalist markets and property rights in exchange for political democracy. Essentially, these policies, through extensive use of Keynesian tools, were successful in striking a balance between the free play of market forces and social needs and entitlement; in achieving an expanding welfare state; and in securing the rights of workers to free collective bargaining and a guarantee of full employment.

As it turned out, the democratic polities of Western societies were unable to keep the balance between economic and social justice. Chapter 2 of the book, titled “Crises of Democratic Capitalism,deals with this in extensive detail. The late 1960s onwards, with growth slowing down, macroeconomic imbalances started emerging. In order to correct these and maintain the balance between full employment and collective bargaining, governments resorted to an accommodating monetary policy, leading to galloping inflation. They had to turn back and switch to a repressive monetary policy to curb inflation, causing unemployment to jump to levels not seen since the Great Depression of the 1930s. These deflationary policy measures were pushed through by determined attacks on trade unionism, epitomised by Ronald Reagan’s victory over air traffic controllers, and Margaret Thatcher’s breaking of the National Union of Mineworkers. At the same time, given that in a stagnant economy the scope for raising resources from the market was limited, governments had to resort to extensive public debt to meet their fiscal commitments. Raising resources both for the public and private sectors emerged as a critical concern. To address these concerns, governments started implementing several structural adjustment policies for deregulating and liberalising the financial markets, supported continually, from the early years of this century, by easy monetary policy. In this ambience of liberal deregulation, banks and financial institutions overreached themselves through reckless drives for profit, bringing the entire system to a point of near collapse. Inevitably, governments had to come to the rescue by nationalising the bankrupt institutions, in the process making a mind-boggling expenditure of trillions of dollars.

Thus, over the last three and a half decades, these systemic disturbances, one following another, through successive eras of inflation, public deficits, private and sovereign indebtedness, have exposed the fallaciousness of the basic tenets underlying the post-war settlement. What we have witnessed all through is declining growth intensifying distributional conflicts, vanishing macroeconomic manageability reflected in, among others, steadily growing indebtedness, an increased money supply, and the ever-present possibility of another breakdown. The power of capitalist democracies to intervene in the markets in the interest of citizens of their countries has proved to be too limited in its reach and efficacy.

The Present

Contemporary capitalism has managed to survive through all these convulsions. The tenacity of the capitalist order has been analysed and discussed over several chapters. Despite stagnation in growth, capital owners have succeeded in continuing to earn profit by weakening traditional institutional and political restraints and undermining the ethical and moral foundations of society. Their methods, termed by the author as “systemic disorders,” have taken various forms: exploitation of speculative opportunities outside “real economy, subversion of the market process, from rule-bending to rule-breaking, from semi-legal to illegal activities and plundering of the public domain through undermining and privatisation. All this is perpetuated through massive corruption, dominating to capturing regulators, and by creating circumstances where the oligarchs are either too big to fail or too big to jail.” And, there is a guarantor of oligarchic property rights even as there are safe havens for oligarchic families and their treasure in the United States (US) and many offshore centres. We are condemned, as the author visualises, to live in a kind of post-Roman Dark Age of Europe that offered a fertile field for oligarchs and warlords. Capitalism is entering a phase of where it “is neither transformative nor adaptive, and unable either to restore [itself] to equilibrium or to replace it with something better” (p 37, emphasis mine). The prospect is grim, “an entropic, disorderly, stalemated, post-capitalist interregnum society” (p 41). Capitalism, to quote again from the author, is

in permanent disequilibrium caused by continuous innovation and pervasive political conflict over the relationship between social and economic justice; over frictions between collective obligations to protect individuals from the fallout of “creative destruction” and individual obligations to adjust to economic change; and over the moral limits, if any, to the individual pursuit of economic change. (p 222)

The Future: A New Order?

What does the future look like? Theorists differ on this (Wallerstein et al 2013). Reviewing the current scenario, Immanuel Wallerstein visualises the eventuality of a global confrontation between the defenders and opponents of the capitalist order for the battle for a successor system, admitting, though, that its outcome is unpredictable. Michael Mann, the sociologist, looks at the future differently. Societies move from one position to another through interaction between different networks of power—ideological, political, economic, military—and they will continue to move in a zigzag path unless and until civilisation destroys itself by “collective human irrationality” such as nuclear war or environmental neglect. Randall Collins sees the seed of destruction in the relentless march of technology through displacement of labour. As mechanisation has rendered the working class virtually toothless, the galloping advance of artificial intelligence and its associated toolkits is set to drive the middle class to penury. The lure of purchasing power of the middle class that was held out as the key to an ever-expanding market would soon turn out to be a mirage. Collins believes that as capitalism has reached a dead end, it has no escape routes now, unlike before. How it will end is a question to ponder over. Will it be a violent social revolution or a peaceful institutional transition? Craig Calhoun foresees a less pessimistic future, placing his faith in a sufficiently enlightened faction of capitalists, though he does not rule out the possibility of a centralised socialist economy with Chinese characteristics.

While sharing the idea that a structural crisis is embedded within the capitalist system, the author does not see, unlike others, the possibility of the emergence of any new order. Capitalism is declining on its own, having lost its capacity to underwrite a stable society. In the absence of any organised protest by the affected classes, the author sees little hope for any fundamental qualitative change in our concepts of growth, profit, and productivity. There is no new social order waiting to succeed. What is in the horizon is not socialism or some other defined social order, but a period of disintegration of uncertain duration, perhaps a lasting “interregnum.”

The grim picture, the author speculates in the introductory chapter, is “a breakdown of system integration at the macro level,” that deprives individuals at the micro level of institutional structuring and collective support, and shifts “the burden of ordering social life to individuals themselves … a de-institutionalised or under-institutionalised society … which for this very reason is essentially ungovernable” (p 14). He quotes, approvingly, from Antonio Gramsci: “The old is dying but the new cannot yet be born.”


There is little possibility of a revival of the kind of relationship between the capitalist and political classes that governed the post-war settlement, as the author suggests. That was essentially a halfway stable political–economic regime in the Western part of the industrial world for about two and a half decades immediately after the war. The context and circumstances have radically changed since. It was then between a uniquely powerful working class and a weakened capitalist class that was, as never before, on the political and economic defensive. That stands reversed today.

Globalisation, the handiwork of capitalist classes in collaboration with the willing political regimes, is under attack from different interest groups in various countries. Several forces are at work to reset the parameters. Within several countries and political entities, there are active movements intended to restrain the excesses of capitalism and choose a path of equitable growth. There is recognition that the logic of individual aggrandisement through reckless pursuit of profit has led to monstrous consequences. It is also acknowledged that if these consequences are to be avoided, the capitalist class must discipline itself to work within the framework of a regime that regulates economic activities to conform to societal values and profits in the interest of social cohesion and economic stability. The political class is also aware that a liberal–capitalist market is not a state of nature, that it cannot allow itself to be seen as the protector of the market that has fallen into the hands of forces that use it for non-liberal, market-subverting objectives, and that it has to re-engineer its institutions and assert itself.

China has a market economy based primarily on private ownership but the political regime has much more influence over the economy than in virtually any other middle-income or developed economy. With the government having direct or indirect control over nearly 38% of GDP, China has the capacity, given its authoritarian character, to influence and control its capitalist class and get an outcome different from what a non-interventionist market would produce (Naughton 2017). In India, within the framework of the democratic structure, with many vocal groups agitating for social and economic protection for the poor and deprived communities, it has been a running battle between market forces for supporting economic growth and social regulation of markets. During the global financial crisis of 2008, the political regime was successful in insulating itself substantively from the adverse consequences of the sudden collapse of the global financial markets and maintaining a stable order through adequate regulatory measures.

A contrasting picture is the European Union (EU), an interesting institutional innovation that shields the capitalist economy from the spectre of democratic pluralism. The European Central Bank (ECB), the kingpin of European monetary union, along with three other political institutions—the European Council, the European Commission, the European Court of Justice—have developed into a de facto government that acts as a guardian and guarantor of capitalist economy. It makes member countries converge on a model of neo-liberal financial capitalism, a one-size-fits-all monetary regime. The ECB is at the crossroads today. Stirrings in several relatively poor countries within the EU are indicative of their opposition to an authoritarian monetary regime and of their desire to have their own political system taking independent decisions to meet the needs of their own citizens. In the US, Wall Street remained subdued for some time after the 2008 crisis. Though it has regained some of the lost ground since, it is likely that the kind of anti-capitalist forces that gathered round Bernie Sanders will assert themselves, sooner or later, more effectively in the political arena. Russia, the other superpower, provides a contrasting example where the capitalist classes can ignore the wishes of the ruling authoritarian political ruler only at their own peril. Many countries are witnessing forms of protest that are not spurred by any ideological leanings, left or right, but, by anti-establishment insurgency riding on anger, frustration, or resentment of citizens.

The dialectics of politics and capitalism is unfolding itself in unpredictable ways in different countries. Complex reality does not lend itself to a simple and arbitrary definition of what constitutes a capitalist or socialist society. We are slowly moving to a world where political regimes with different economic and social persuasions strive to use the market economy to get different types of outcome. Some have initiated policies that involve growth, social security, and pro-poor redistribution. Others are focused on using the capitalist and market system to have a more effective say in the global arena. It is a mixed kind of world we live in and there is little chance that in the foreseeable future we will have a rigid system of the classical socialist or capitalist type, or any rigid global economy. There is a striking variety of relationships between political and capitalist classes in different countries, but variety is no chaos.

Is the outlook for the future as dismal as the author visualises? As we have seen throughout history, an ethic of solidarity and responsibility dawns among people in times of crisis, inspiring them to defend their community, their habitation, their natural environment. This is implicit in the concept of double movement as elaborated in Karl Polanyi’s The Great Transformation. He enunciates,

One is the principle of economic liberalism, aiming at the establishment of a well regulating market, relying on the support of the trading classes, using largely laissez faire and free trade as its method; the other is the principle of social protection aiming at the conservation of man and nature as well as productive organisations, relying on the varying support of those immediately affected by the deleterious action of the market—primarily but not exclusively, the working and the landed classes—and using protective legislation, restrictive associations, and other instruments of intervention as its method. (Polanyi 1957: 132)

Currently, we are possibly in the phase of a reverse swing. Need we be so pessimistic?


Naughton, Barry (2017): “Is China Socialist?,” The Journal of Economic Perspectives, Vol 31, No 1, Winter.

Polanyi, Karl (1957): The Great Transformation: The Political and Economic Origins of Our Time, Boston: Beacon Press.

Wallerstein, Immanuel, Randall Collins, Michael Mann, Georgi Drerluguian and Craig Calhoun (2013): Does Capitalism Have a Future?, Oxford: Oxford University Press.

Updated On : 15th Dec, 2017


(-) Hide

EPW looks forward to your comments. Please note that comments are moderated as per our comments policy. They may take some time to appear. A comment, if suitable, may be selected for publication in the Letters pages of EPW.

Back to Top