The premise of this blog is that we are in the midst of a global crisis of capitalism. Capitalism — which I’m using as shorthand for the social order that combines a market economy animated by consumerism with a large bureaucratic state, organized science, and mass media — has triumphed around the world, bringing material plenty to billions and promising in due course to make such plenty the global norm. But nothing fails like success, and capitalism’s stunning success is no exception. The advent of mass affluence has satisfied basic material needs, but in so doing has brought new needs to the fore — needs that capitalism is much less capable of satisfying. And even as our social system’s alignment with the requirements of human wellbeing has gone askew, its overall vigor is declining — in large part due, in one way or another, to its prior productivity. The food at this place doesn’t taste as good as it used to, and the portion sizes are shrinking.
Assessments along these lines are not hard to find these days. Consider the following book titles from the past decade or so (I’m the coauthor of one of them): The Great Stagnation. The Rise and Fall of American Growth. The Captured Economy. Where Is My Flying Car? Deaths of Despair and the Future of Capitalism. Twilight of the Elites. The Revolt of the Public. The Constitution of Knowledge. How Democracies Die. Our Own Worst Enemy. The Decadent Society. On Decline. All variations on a common theme: liberal democratic capitalism is coming unglued.
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So the idea that we are in a period of crisis — or decline, or decadence, or what have you — is definitely in the air. But that doesn’t mean it’s right. It’s a diagnosis I for one would have flatly rejected until a few years ago. Before that, I had been convinced that capitalism was about as vigorous as ever, and that it could be counted on to continually expand opportunities for better, happier, healthier, freer, more rewarding, more fulfilling lives. Here I am in 2011, pooh-poohing the idea of a “great stagnation.” Here I am in 2014, on stage with Steven Pinker, wondering how people can remain so obdurately pessimistic in the face of a relentlessly improving world.
And focusing on the global picture, I was right to be optimistic. Between 1990 and 2015, the percentage of people living in extreme poverty worldwide plunged from 36 percent to 10 percent — arguably the greatest quarter-century of uplift in the history of Homo sapiens.
But to accurately judge the health of the capitalist system, you have to look at its leading edge in the rich democracies. The original running dogs of capitalism, we’ve caught the car the rest of the world is still chasing — so where we are now offers a good picture of where the world as a whole is heading.
Even with regard to the situation at home, I remained bullish notwithstanding the 21st century’s mounting trials and disappointments. I saw the productivity boom from the mid-90s to the mid-00s as a return to capitalist rude health after the macroeconomic disturbances of the 70s and the reforms of the 70s and 80s. I recognized the rise in inequality over the prior decades, but I saw it as mostly an unfortunate side-effect of benign developments — and the result of cultural lag in adapting to the requirements of an information economy.
But after the Great Recession and the anemic recovery that followed, the 90s started to look like just a temporary break from the post-1973 “new normal” of low productivity growth. And in this sluggish environment, I lost confidence that better schooling and worker training would translate into ongoing better opportunities down the socioeconomic scale.
Turning my attention squarely to the twin ills of slow growth and high inequality, I teamed up with Steve Teles to write The Captured Economy. The experience of writing that book – which focuses on policies that simultaneously exacerbate both of those twin ills – led me to a much darker conception of American political economy than I had previously entertained. I came to see that capitalism’s capacity for both dynamism and inclusion is being systematically throttled by wealthy and powerful economic interests, which dominate policymaking processes to skew rules to shield themselves from competition and redistribute income and wealth up the socioeconomic scale. Puzzling over why the redistributive effects of earlier government interventions went downward, upward, and sideways, while those of recent decades have been almost uniformly regressive in their impact, I concluded that the declining representation of ordinary workers in the political and policymaking process was the major culprit. And so now I saw people outside the elite as being not only economically marginalized, but (not coincidentally) politically marginalized as well. The barriers to a revival of postwar dynamism and inclusion now seemed to me to be formidable.
Steve and I turned in our manuscript for The Captured Economy a week before the 2016 election. Suffice it to say, nothing that’s happened since has done much to brighten my outlook. On the contrary, just the fact that Donald Trump could get elected told me that something bad was wrong with our country — not just with our politics, but with our culture and our society. And the fact that countries around the world have been experiencing similar turmoil and self-sabotage left me convinced that the causes of our troubles must be global in nature.
And then we had a plague. And after an estimated 18 million dead and counting worldwide, no government anywhere has done much of anything to make sure we’re better prepared for the almost inevitable next time.
OK, so I’ve offered a brief explanation of how I came to believe that our capitalist social system is in some kind of crisis. But what kind of crisis? I’ve said already that capitalism is failing to satisfy the higher needs brought to the fore by mass affluence. What is the precise nature of the maladies that cause this failure?
For the standing-on-one-leg version, what I see as the crisis of capitalism is a generalized version of the problems Steve and I wrote about in The Captured Economy: slow growth, high inequality, and a political system rigged to deliver both. In that book we were looking specifically at economic performance, but if you gaze through a wider lens at our overall social system, you see those same basic problems: a lack of dynamism, not only in economic production but also in scientific and technological progress as well as cultural innovation; a lack of inclusion, not just in terms of relative income, but also social status and access to a generally high quality of life; and, in this current time of troubles for liberal democracy, a diminished political and cultural capacity to put ourselves back on the right path.
I use the word crisis to be emphatic: I believe that absent some big, difficult changes in the way we live and govern ourselves, we run the serious risk of genuine catastrophe. But I don’t think we’re doomed, which is why I prefer crisis to decline or decadence. The latter two suggest something irreversible: there’s a life cycle, and we’ve passed the peak and are now on the downside slide. Crises, though, can go either way – and that’s how I see our current position. The biggest problem with the word is that it gives the impression that things are coming to a head right now; the way I see it, things are coming to a head, but over the next century or so rather than the next few years.
The claim that we are in a political crisis is the easiest sell. Liberal democracy is clearly under strain, here and abroad. Among many other fine works written about these troubles, How Democracies Die by Steven Levitsky and Daniel Ziblatt is especially effective at conveying how alarming the current situation is. In the book the authors develop a checklist, based on historical experience, of the stages of democratic breakdown, and you can then see for yourself how many boxes of doom that the United States, or another country you care about, has already ticked. Tl;dr: we’re not in great shape.
The crisis of liberal democracy is in turn a crisis for the larger capitalist social order in two distinct ways. First, the protection of basic human rights and civic freedoms is itself a vitally important element of a good society; the loss of that protection thus constitutes, all on its own, dismal and dispiriting regress. Beyond that, liberal democracy is not only the least wicked governance system currently on offer; it is also far and away the most effective. The prospects for remedying capitalism’s problems with dynamism and inclusion are far bleaker under autocracy, which as a general matter is much more prone to corruption and much less well incentivized to prioritize the broader public’s welfare.
The phenomenon of slowing growth and faltering dynamism is widely recognized as a problem — but as a crisis? (OK, not everybody grants that the phenomenon even exists; some, often associated with Silicon Valley, argue that growth is fine and that the problem is with our measurement of GDP. To be sure, lots of consumer welfare provided by the information economy doesn’t make it into the GDP accounts. But it’s always been the case that GDP leaves out a lot. For the information economy boosters to be correct, they have to show that the measurement problem has gotten worse over time — and that they have not done. Indeed, I’m reasonably sure the measurement problems used to be far worse: consider the welfare gains from the dramatic increase in life expectancy between 1900 and 1950, which have been estimated to be basically equal to measured GDP during that period.)
Here’s where you need to think of the crisis as a decades-long affair. I’ll write much more about this down the line, but we’re going to need some big technological leaps to make our civilization sustainable. To avoid horrible environmental wreckage and its destabilizing effects, we need to transition to clean energy and away from factory farming; to accomplish the latter, we need not just clean energy but abundant cheap energy. We need to upgrade our biodefense capability to stave off new pandemics — and protect us from the nightmare scenario of engineered pathogens.
Concerns about sustainability are generally associated with skepticism, or even outright opposition, to continued technological progress and rising living standards. But grinding things to a halt now will not save us; on the contrary, it will ensure catastrophe. The fact is that our current technological dispensation imposes heavy external costs that are now coming due; we can’t reduce our risks by staying put. In What We Owe the Future, Will MacAskill analogizes our present situation to that of a rock climber midway up a cliff face. If we try to remain where we are, we will inevitably exhaust ourselves and plummet into the abyss; the only path to safety and security is up.
As to capitalism’s failures of inclusion, here the crisis — if it exists — isn’t one of sustainability. That is, there’s nothing unsustainable about inequality and marginalization. As Walter Scheidel argues persuasively in The Great Leveler, steep hierarchies have been the norm since the dawn of civilization; egalitarian countermovements have been the temporary and passing exception. But in the pre-modern past, most people had to be poor because the world was poor; humanity’s productive capacities were not nearly up to the task of providing plenty and a good life to all. The only alternative to a world where a tiny minority was rich was one in which poverty was universal.
Now, however, there are (at least in the rich democracies) no technical obstacles to general enjoyment of material plenty and access to high quality of life. At this point, the perpetuation of mass exclusion and marginalization is a choice — a collective choice that is the end product of untold millions of individual choices, but a choice nonetheless. And there’s a name for technologically advanced societies that make such a choice: we call them dystopias. In the century from 1870 to 1970, the explosion of capitalist wealth creation set the world “slouching towards utopia,” as Brad DeLong’s wonderful new book by that title relates. Since then, though, we have fallen off the golden path: the steady expansion of access to a better life has gone into reverse in the world’s most advanced countries. After a half-century of this wandering in the wilderness, we can certainly imagine regaining our bearings and finding our way to a much more inclusive social order. But it’s also easy to imagine that we wind up in a cyberpunk style of dystopia — with a narrow, spectacularly wealthy elite, deeply entrenched and ever more heavily barricaded, lording it over the marginalized, superfluous masses and keeping them in line with bread, circuses, and mass surveillance.
The crisis of inclusion, then, consists of the threat of dystopia. But it also works to exacerbate the simultaneous crises of democracy and dynamism. Steep class divides do not make for stable democracies; ignoring and squandering the potential talents and skills of most members of society is not a recipe for innovation and progress.
You can see in my description of the crisis a fair amount of overlap with the concerns raised by the “longtermism” wing of the effective altruism movement — which has been getting lots of attention of late thanks to the incredibly high-profile rollout of What We Owe the Future. In particular, we share an appreciation of the risks posed by technological stagnation, and a shared sense of the high stakes of the coming century. I’m not on board with all the utilitarian moral theorizing that animates the longtermist view, but that’s not much of a problem since we agree that the coming decades are critical. You don’t need more than the conventional motivations of wishing for a better world for your children and grandchildren to become convinced that the longtermists are raising some really important points.
Of course, perhaps their most absorbing concern is with a risk I haven’t mentioned — namely, that artificial general intelligence is coming soon, and depending on the degree of its alignment with human values could bring with it either the millennium or the apocalypse. Whether true AGI is just over the horizon or not, I have no earthly idea, but I’ve seen enough in recent years to expect that what we now call AI will continue to dramatically improve and expand its capabilities. And those capabilities could be used for great good, or great ill, or both. But I’m far too uncertain about any of this for it to weigh heavily in my assessment that capitalism is in a critical period.
Bringing all of this discussion back to the title of the blog, the arrival of the permanent problem is the setting, and the trigger, for this crisis of capitalism. Capitalism grew to become reasonably inclusive in delivering wellbeing when the name of the game was providing rising material living standards and freedom from want and ignorance. But the game has shifted to improving quality of life, and the failure to solve that for more than a well-educated minority constitutes capitalism’s crisis of inclusion. Meanwhile, very different from how Keynes imagined, learning to “live wisely and agreeably and well” is not simply a matter of slowing down and smelling the roses. The first part of mastering the permanent problem consists of sustainably keeping the economic problem at bay — and that we have not done, and cannot do without a continuation and revival of technological innovation. Thus, in order to be in a position to solve the crisis of inclusion, we need to solve the crisis of dynamism. And to maximize our chances of successfully managing the twin crises of dynamism and inclusion, we need to resolve the crisis of our politics.
So the permanent problem is not only here, it is urgent. And what’s more, it is fiendishly difficult — because the very conditions that have brought it to the fore, namely the arrival of capitalist mass affluence, have made each element of the triple crisis more difficult to master. Fleshing out that contention will be the object of the next several essays. Each time I will talk about a different deep-seated social development — a “megatrend,” to resurrect a buzzword from the 80s — that has contributed to our current predicament. And each of these megatrends is a consequence, in one way or another, of our prosperity. That’s the pickle we’re in: we’ve arrived at the final boss fight with all our health warnings flashing.
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Fantastic article and Substack overall. One question I am trying to dig into is - who is working to address some of these challenges? In other words, for those who want to be part of a positive solution where can we direct our attentions?
Really excellent. Keep recommending books too please.