The Crisis of Capitalism Animated

The economic/financial picture is looking ugly once again. Indeed, just yesterday, the most emailed New York Times article warned that the stock market might be on the verge of an epic crash, one that will bring the Dow below 1,000. So how did we wind up in this global credit mess? We've heard various explanations, most assuming that our capitalist system didn't quite function as it should, and that a few regulations will take care of the problem. But this is not the position taken by David Harvey, an important social theorist and geographer (now at CUNY). Drawing on Marxian analysis (it's still alive and well somewhere), Harvey suggests that the crisis is built into capitalism itself. It's not the result of too few regulations. Rather it's part of capitalism's internal logic. (Mark Mancall, an emeritus Stanford history prof, echoes some of these basic thoughts on "Entitled Opinions" by the way.) The animated video above is an outtake from a longer lecture presented by Harvey at the Royal Society for the Encouragement of Arts, Manufactures and Commerce in the UK. You can watch the video in full here. Meanwhile, David Harvey has also made available online a free, 26 hour course that offers a close reading of Karl Marx's Capital. It appears in the Economics section of our collection of Free Online Courses.


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  • joe says:

    Marxism? Really? Marxism?
    The fact that this guy is employed is one of the reasons why the system doesn’t work.

  • The Nick says:

    How did a country of outcasts from other empires start from nothing and surpass others that had hundreds (if not thousands) of years head-start.

    Capitalism. Capitalism = Freedom.

  • Tris says:

    Wow – so many interesting fallacies in just 2 comments. Kind of pointless responding to alehouse statements – however a couple of points arising from them. Joe – the US is supposedly a home for free-speech, tho this doesn’t seem to include an old Germans philosophies? Repression or discussion, I know where i stand… The Nick – interesting question, with sooooo many answers – heres some: most of the empires(greek, roman, hittite etc) were dead or in decline, the europeans who invaded the US found either peaceful or poorly equipped indigenous populations they could exterminate or exploit leaving them with a huge unexploited landscape to use for themselves. I’m not sure the history of the world is a ‘past the post’ race – where do we draw the final line? – but the chinese might argue that they have several 1000 years of civilisation and empire and despite some difficult periods will probably beat us all to the prize – particularly as the US has had to take out some enormous loans with them – under the lovely shiny structures of capitalism.

  • Hanoch says:

    Unfortunately, you have to slog through 9 minutes to ultimately get to Mr. Harvey’s point. And, given Mr. Harvey’s Marxist viewpoint, it should not be hard to predict: he envies the rich. As every good Marxist believes (but to which he will not admit), it is better that all are made poorer, as long as none does exceptionally well.

    Mr. Harvey does not attempt the foolish exercise of comparing the overall wealth and innovation generated by free societies which employ free markets against those that had the misfortune of buying into (or becoming involuntarily subject to) the Marxist delusion. Nor does he point to any other system that has worked better than the free market. The reason is simple: he can’t because there is none.

  • JJ says:

    Great talk and animation, but makes me a bit sad to see so few women in the cartooning. It is that lack of representation of women in movies, books, art, etc… that sends a subtle, silent, yet very powerful message to society that maybe women just aren’t really very important in the big picture. We all internalize that message… especially the girls who are beginning their journey into the world.

  • PeterB says:

    I think the animation is great and very clever, but turns the whole thing a bit black and white (and red) :-)
    I think the gap in capitalism as we’re now feeling it has more to do with capitalism for capitalism’s sake and not as a contribution to the creation of industry or society in general (as it should be).
    How do credit default swaps or any of the other creative banking instruments that’s been created over the last 10 yrs contribute anything to anyone beyond the banking institution itself? It doesn’t. And in my mind that’s at the real heart of the issue.
    So let’s not throw the baby out with the bathwater –

  • Shane says:

    @PeterB

    You missed the entire point. The very nature of capitalism is for it to find ways to over-extend and collapse itself. This isn’t the first financial recession and it won’t be the last.

    @Hanoch

    Wow. You didnt even watch it. It is not a moral condemnation or pushing some political thing. It is objective scientific analysis pointing out that systemically it does not work. The existence of wealthy (an over accumulation) brings it closer to its collapse.
    Its like a car that breaks down every 5miles down the road and eventually 4 poor people have to get out and push for 6 miles while the rich person naps inside. Obviously the rich and the poor will have differing views on whether it is worth enduring.

  • Andrew S. says:

    It amazes me how often the current system of corporatism in America is mislabeled “capitalism,” let alone that this is seemingly a common view held in academia. A system of free and voluntary exchange between people with no government interference (aka capitalism) is as far from modern America as the former USSR is from a modern, western social democracy.

  • Shelley says:

    My writing is about the last Great Depression. The regulatory legislation passed by Roosevelt was trashed or evaded by Wall Street. Result: 1929.

  • His comment about mortgages being an ideal way to keep workers from protesting is very interesting.

  • Roger W. says:

    To Andrew S:
    I have to disagree with you. Capitalism is simply the accumlation of capital. There is absolutely nothing in its simple definition that speaks to how or why this capital is accumulated or who is restricted or free to assist in this accumulation. There in lies the problem: because there is no restriction on HOW the capital is accumulated, governments can even be involved in such accumulation a la China and Greece. Even theives can be involved in the system a la the United States and Great Britain. Capitalism does not discriminate; however, its collapse seem to indiscriminantly oppress the poor, working and now the middle classes.

  • Evan Plaice says:

    I think economics academics need to change their perspective to be something more along the lines of carrying capacity in ecology. The longer you deplete a resource beyond it’s ability to replenish itself, the harder the ecosystem will crash when it tries to re-balance itself.

    I left business school because I found it to be a waste of time. The way academics push around economic theories and preach that a few neat little mathematical formulas can accurately model modern economies is ridiculous. I finally left because I got sick of hearing the religious lectures about how the market will correct itself, as if the market has magical self-balancing powers.

    The concept of why capitalism fails is simple (and it’s primarily based on the corporate model). The basis of a corporation is to gain capital from investors in exchange for a portion of the profits that the company makes in interest (in either growing shares or regular distributions). In order to continue attracting investors the company needs to continue to grow and produce more profits indefinitely.

    Once the company reaches it’s hard limit (market saturation) it has 2 options. 1, is to continue playing by the rules and try to maintain its current size/infrastructure in the long run with the risk of losing a large portion of its investors to newer faster growing companies (which pretty much guarantees a companies’ downfall because the market is 100% based on money figures with a complete disconnect from non-financial value). 2, is to continue market growth until the company reaches 100 or near 100% market saturation whereby it can either artificially increase the value of its products (IE, monopolistic pricing) or it can break out and expand into many other markets (which often leads to the common trend of modern mega-congolmerates like WalMart) which will also eventually become saturated too.

    The flaws of capitalism is directly relative to the flaws of corporations. Not because of some of the heinous acts that corporations have been known to commit but because the very foundation of their model creates a business that requires insatiable growth to sustain itself in an environment where resources are scarce (no economist in his right mind would argue that resources aren’t scarce).

    Therefore, while the corporate model has proven to be a very effective business model to gain capital needed to build a thriving business, every single corporation ever created has a limited lifetime where it will invariably collapse. The people who become wealthy from corporations are the people smart enough to invest in corporations at their peak of growth and cash out just before they collapse. That’s why the stock market is so obsessively concerned with immediate feedback of a company’s value. The short term market is nothing but high stakes gambling on the collapse of corporations.

    A system that is not sustainable therefore is subject to crash.

  • Jim says:

    David Harvey does not mention one important barrier to capital’s expansion that Karl Marx discusses in Part Three (chapters 13-16)of vol 3 of “Capital” – “The Law of the Tendential Fall in the Rate of Profit”. This arises from the domination of investment in machinery over investment in human labour power – but it is only labour power that produces surplus value. So the rate of profit (not absolute volume of profit) tends to fall. Hence capitalists are not investing in industry today, as there are insufficient profits.

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