Letter from a reader: what will happen with capitalism after this crisis?

This morning I received a letter from Ken. He is a long-term, British reader of mine and a helluva nice guy. 

I had the pleasure of meeting him once, in real life, during an event upon a possible future economy, in which ubiquitous information and technology sharing would lead to a peaceful and prosperous world for all human beings. 

Even though we were both not very impressed by the presentation, it was truly wonderful to get acquainted to Ken. And this morning, I received this intriguing question from him:

Hi Ernst,

I continue to absorb your excellent articles.  We are certainly living in interesting period. It could go many ways.

Ernst, I wanted to ask you.  If/when things go pear shaped and our current economic system (Capitalism) fails...what economic system do you think will replace it?

My answer to Ken:

At this moment, I would not just call the economic system capitalism. It is rather becoming a neoliberal hypercapitalism, in which there are winners and losers and almost nothing in between. The traditional middle-classes dwindle and there is hardly a safety net anymore for all people, who missed the boat during their study or early career or went through an enduring, tough period in their life.

Labour has almost flexibilized into oblivion and fixed labour contracts are rapidly becoming a luxury good, only reserved for either a vanishing, ‘happy few’ of older workers, or for very talented and scarce, ‘special breed’ personnel and the higher ranks in companies, who need to be lured with a high and stable salary, bonuses and other special favours. 

All other workers are either pushed into being freelancers, who are solely responsible for their own income, pension, social safety net and general well-being, or they get temporary labour contracts and zero hour contracts, that offer near zero security for the long term.

Companies have simply become too scared and reluctant to hire someone on ‘his/her blue eyes and his/her killer smile’ alone. 

This is because of the legal and social consequences that circumstances as longterm worker illness, possible labour conflicts and the unilateral ending of contracts could pose to the sheer existence and financial health of (small) companies. This is in spite of new legislation, that was meant to break open the Dutch labour market, but in fact caused the total opposite, as an unintended consequence.

The few middle class workers that receive a fixed contract must undergo stringent screenings and pre-intake conversations, extensive assessments and two or three job interviews before they finally receive a job. And even then this initially leads to a few one year contracts on many occasions, before the fixed contract is handed out eventually. Everything to prevent small and large companies from being attached to a disappointing, 'weakest link' worker in the long run. 

And so, instead of being an asset of the utmost importance for the well-being and future success of the company that needs to be cherished, educated and elevated, workers are rather seen as a possible risk. A risk that needs to be contained and mitigated. As a matter of fact: distrust and risk mitigation seem the name of the labour game, currently... 

In fact, many workers in large companies seem little more than a durable means of production with a limited preservability for the future, only tolerated and appreciated until the moment that someone or something better (i.e. “robotized systems”) comes along the way.

This is for instance expressed in unscrupulous slogans, like “Be up or be out” and the growing impatience of executive management with average ‘water carriers’ among the personnel of companies. Every worker must either be a passionate Olympic champion in his own working area or he will be replaced by someone who is! There are unfortunately quite a lot of companies, which see their personnel as ‘one trick ponies’, useful for the greater good of the company for as long as they master their trick.

Fortunately, however, other companies still do invest a lot of money and effort in their workers and teach them new areas of expertise by trainings, workshops and by letting them get hands on experience, when their old areas of expertise have become obsolete. Nevertheless, their number seems to be dwindling in recent years, driven by a unilateral focus on shareholder value, short term interests and KPI's.

And what distinguishes this time most, in my humble opinion, is the fact that the ‘winners’ in society hardly feel compassion and solidarity with the alleged losers anymore, but see them as people 'who were simply not good or hungry enough'. People that can be ignored and neglected, as their misfortune could cast a shadow on one's fortune in life, as “you were the master of your own success, weren’t you?!”.

The losers and the people on the wee end of the situation themselves, however, don’t blame the winners anymore for their lack of compassion and their treason, with respect to general solidarity. They also start to believe that they failed in life and missed the boat, due to their own incompetence or misfortune. They are losers! 'nuff said!

Instead, they start to blame other losers or minority groups – cheap workers from East-Europe or people with certain religions – for being the cause of their misery (i.e. in the form of a global conspiracy). 

For instance: the Polish or Bulgarian constructor or factory worker, who took a Dutch worker's job is guilty of the Dutch worker's misery, and not the company who replaced the Dutch worker with a Polish one itself. "The company had to do so, otherwise it would not be profitable anymore". 

This is the reason that the current society has seemingly become so angry, impatient, envious and nervous: simply too many workers and other people have lost a sense of security in their lives and don’t know what and who to blame for that. As a compensation, they start blaming the aforementioned minority groups and other people who are not winning in society.

Champions are hot! Losers are not...

This is a situation that cannot last forever, as the people in the lower and less successful classes and especially the younger generations get more and more frustrated and fed up with their difficult situation and their slow (perhaps impossible(?)) struggle to reach prosperity and a long-lasting sense of security. 

The differences between the haves and the have-nots simply become so big eventually and the urge of the haves for total control and containment of the have-nots becomes so enormous that ‘the bomb will burst’ in the end. 

Even though this situation is probably quite far away yet, there is definitely a mounting urge for total control of the population among the central and local governments in the European countries: ubiquitous camera surveillance, widespread eavesdropping of telephone and internet traffic, rings of license plate scanners around large cities and crowd control systems are the well-known symptoms of this urge for control.

And when the bomb bursts, a few things can happen then:

• A “revolution” happens in which the old and useless government is overthrown by a government, based on the sole power of a radical strong man (often a dangerous populist):
• This strong man either promises that he will guide the country to greener pastures, by removing the objects of the population’s anger (hence: Germany during and after the interbellum or Turkey during these days);
• Or he promises to get rid of the classic elites in his country (hence: the French and Russian revolutions), as they allegedly caused the dire situation for the population;
• Something dramatic happens as a large war, a natural catastrophy or a large outbreak of a lethal disease. Such a cleansing process (hence: a purge) provides a necessary ‘reset’ in a country or a continent, making the people understand that they need each other and must learn again to rely on each other;
• The soft power of a gentle, natural and truly great leader comes over the country and the population unites – more or less – under his influence (hence: Mahatma Gandhi or Nelson Mandela); 
• A revolutionary invention, a newly discovered natural resource or a big paradigm shift brings so much new prosperity to a country, a continent or the world that litterally everybody can profit from it and the money flows upon the ceiling, thus enabling a new social-democrat fundament in the country; 

Suffice it to say that most of these options – perhaps I missed one or two – are either not very desirable or not very plausible to happen.

Even though the answer always lies in politics, it is unfortunately not very plausible either that the current, leading politicians themselves learn to sing another tune, as long as they are at ‘the prosperous, right side of the balance’.

The nature of politics is that the people with money and good societal positions can buy their influence upon politicians in a number of ways, while the less successful majority cannot do so. 

Tell-tale examples of this mechanism are the current American elections and the political situation in the United Kingdom, where the Tory government messed up terribly, but remains in power with almost the same people who messed things up. This is the reason that the established politicans probably won’t change their stance before their political career has ended, the soft or the hard way.

And now about your question: I don’t think that capitalism will be replaced soon by a communist, Maoist or Marxist system, as these systems have also proven to be utterly unfair for the people for which they were meant originally. One unfair system with elites would simply be replaced by another unfair system with different elites, but with generally the same results for the majority of the population.

And a new system, based upon a society without money and an economic foundation, but ‘with liberty, justice and equal information, technology and chances for all’ – like the one that has been discussed during our "in-real-life" meeting a few months ago – I really don’t see that happen yet in my lifetime; even though I am a genuine ‘Trekkie’ (i.e. a classic Star Trek fan) and an idealist.

A dear friend of mine is one of those ‘knights with tinfoil hats’, who believe in a massive, global conspiracy, led by the heirs of the Rothschild family: a conspiracy that should bring the world towards a new world order. 

I, however, don’t believe in that sort of thing...

That is the reason that I believe that some form of capitalism will continue to be 'en vogue' in the Western hemisphere of the world after the depression has ended somewhere in time. 

However, even though I am totally clueless about the kind of capitalism that will emerge after this depression and the possible large-scale events that might come out of this ("let's hope not"), I am convinced that it must be a gentler, more social-democratic capitalism, with more solidarity for the people that are not so lucky in live. 

I truly hope that this gentler capitalism emerges within the EU and the European continent, but we yet have to climb some very dangerous fences for that.