Interview: Does capitalism have a future? [The Hankyoreh / 한겨레]

Jan 16, 2015

~Yale professor Immanual Wallerstein says South Korea’s future hinges on integration with the rest of Northeast Asia~

Does capitalism have a future? Today’s capitalist system is facing such serious issues that the word “crisis” has become part of the everyday conversation, while discussions on alternatives have become tinged with despair. Last year saw the publication in Korean translation of a book that asks this very question: Immanual Wallerstein’s “Does Capitalism Have a Future?,” co-written with Randall Collins, Michael Mann, Georgi Derluguian, and Craig Calhoun (translated by Seong Baek-yong for Changbi Publishing). The release was accompanied by a conversation exchanged in letters between main author Wallerstein, a Yale University emeritus professor and analyst of global systems, and Lee Kang-kook, an economics professor at Japan’s Ritsumeikan University.

In the conversation, Wallerstein said the recent crisis of capitalism is beyond solving through the Keynesian approach of increasing state intervention. While Thomas Piketty, whose “Capital in the Twenty-First Century” has drawn global notice, contributed to the public debate on worsening inequality under the current global system, Wallerstein also noted that he suffers from the same limitations as other mainstream economists. According to Wallerstein, US hegemony is in a state of catastrophic collapse, and while its place could be taken by China and Northeast Asia, the growth of the middle-class of Chinese consumers is poised to strain the world economy and exacerbate the crisis…

As South Korea loses its economic vitality, its future hinges on integration with the rest of Northeast Asia, Wallerstein said. He noted that the country could play a pivotal role in that process, but added that doing so would first require improving relations with North Korea and creating a system of inter-Korean integration.

= The Global Financial Crisis and Its Aftermath =

Lee Kang-kook: First, I like to know about the reason and motivation why you and your co-authors planned to write this book. Why should we pose this fundamental question about capitalism now? We will ask you about the end of capitalism later in more detail.

Immanuel Wallerstein: We all believe that the world-system is in enormous difficulty and that the general discussion lacks historical depth as well as weak theorizing. We hope to stimulate a more useful debate about the world’s alternatives.

Lee: After the global financial crisis, the world economy has been in serious recession for long, much longer than economists expected. How do you evaluate the current state of the global economy, and especially responses of the advanced country governments such as quantitative easing policy? Following the crisis, Keynesians appear to have returned and become more powerful. They argue that the crisis was a failure of unregulated capitalism and the state can and should manage the capitalist economy rather successfully. I think that you must be very critical of this view.

Wallerstein: This is one of the things upon which the five authors do not agree. Two of us seem to argue that a Keynesian approach might work. Two others, including me, think the situation is way beyond that point. Even those who are sympathetic to a Keynesian approach argue that this is not enough.

Lee: Then, what do you think are fundamental causes and implications of the global financial crisis, and how is your view different from other positions, including lefitsts? I think that this crisis could be the specific crisis of financialization in the B phase of Kondratiev cycle from your perspective. But I am not so sure whether it is really a part of the structural crisis once in 500 years, as you emphasize.

Wallerstein: The major difference between my own view and that of many, probably most, leftists is that most leftists emphasize the strength of popular resistance to a worsening situation. I don’t deny this, but for me popular resistance is a long-time constant. What has been added now is the fact that capitalist accumulation via market processes no longer works for capitalists. Therefore, capitalists as well as the vulnerable classes are looking for alternatives to capitalism in order to ensure their wealth.

Lee: It is interesting that even in mainstream economics there are now concerns about a gloomy future of capitalism. For instance, Larry Summers mentioned ‘secular recession’ and Robert Gordon argues that growth rate will become lower in the long-run mainly due to stagnation in innovation. Could you make some comments on these arguments from your point of view?

Wallerstein: What you will notice in such mainstream gloom is that there always is an escape clause. They are saying: All is gloomy, unless you do x or y. I don’t think there is such an x or y.

Lee: Now, inequality in capitalism is a hot issue in economics. Thomas Piketty recently presented dynamics of inequality in capitalism in “Capital in the Twenty-First Century”, which became a bestseller. He calls for higher progressive income tax and global capital tax in order to reform capitalism. He predicts that the 21st century will become worse without any efforts since the return on capital tends to be higher than the growth rate. It brought about a serious debate among economists. How do you evaluate Piketty’s work and the related debate? What do you think of the dynamics of inequality in the history of capitalism?

Wallerstein: Piketty is basically an intelligent and very technically competent mainstream economist who favors a social-democratic solution to the situation. He suffers therefore from the same limitations of other mainstream economists. That said, his book has had the virtue of reinforcing a public debate about growing inequality in the world-system. And that is a good thing.

~Capitalism and Prospects for Transition~

Lee: You have argued that the fundamental cause of the end of the current system is a continuous rise of cost in production, including labor, input/infrastructure, and tax for several hundred years. I think your explanation is somewhat different from an original Marxist argument about the falling rate of profit rate due to the rise of organic composition of capital. Anyways, one may argue that the trend of rising costs is not so clear in reality. For example, at least wage has been stagnant after the 1980s in comparison with labor productivity growth, which resulted in a fall of the labor share. What do you think?

Wallerstein: The costs of production have always risen in a pattern of two steps upward, one step downward. You are noticing the one step downward, and ignoring the two steps upward. This pattern over 500 years has brought the costs to such a high level that they are approaching an asymptote and are too near the possible maximum price rate for their products. Hence, the system oscillates and is in chaotic wild swings…

Excerpted; full article link: http://english.hani.co.kr/arti/english_edition/e_international/674079.html

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