Written by Keith Hart
National capitalism starts unravelling in the 1970s
In the early 1970s, the United States’ losing war in Vietnam unbalanced global money supplies, the exchange rate mechanism broke down, the dollar was unpegged from gold in 1971, money market derivatives were invented in Chicago the next year, the Organization of Petroleum Exporting Countries made the first of two massive hikes in the oil price, and the world economy entered a depression from which it has never fully recovered. Growing cracks appeared in the Keynesian system and neo-conservative liberals, led by Ronald Reagan and Margaret Thatcher, seized political advantage through an ideology of the prewar market fundamentalism operating under the revivalist slogan of ‘sound money,’ supported by Milton Friedman’s ‘monetarism’.
A counter-revolution against the postwar economic order took place in 1980 with the aim of freeing up global capital movements, deregulating markets, and privatizing public institutions. The money interest was back in charge, although it took the Soviet collapse, the rise of China and India as economic powers, and the internet going public in 1989–91 for ‘one-world capitalism’ (neoliberal globalization) and a lawless global money circuit was liberated from its remaining shackles.
The 1970s were a watershed. The volume of world monetary transactions was limited then to payment for international trade in goods and services. Today most international transactions are money exchanged for money in another form. The largest sector is foreign exchange where daily turnover is $6 trillion! National economies predominated after the war; now they are swamped by a tide of money that vastly exceeds their own resources. People are no longer valued for their labor, but rather for the money they spend as consumers.
Capital’s main purpose now is to persuade them to part with their money. The power of labor unions was broken under the threat of exporting production to cheap-labor countries or of importing their workers. This was the next stage of financialization—the shift from goods to services, especially finance and entertainment, the removal of political controls from the global money circuit, and the invasion of the public sector by private capital, including the corrupt purchase of politicians and bureaucrats. The priority of central banks shifted from managing the money supply to keeping up prices in asset markets while giving away interest-free money to chosen corporations and billionaires for speculation. The ensuing plutocracy has now merged money and power.
The rise of Big Tech and the banks
The dotcom boom bust soon after the millennium. This made available unsold bandwidth, facilitating the rise of social media and Big Tech. All the loose money had to go somewhere and real estate, the second biggest asset market after equities, was the obvious choice. The Federal Reserve fueled a real estate boom quite unlike any that preceded it. Alan Greenspan’s brainchild accelerated a version of rentier capitalism that serves only the super-rich. George W and Halliburton now played roles indistinguishable from those of George III and the East India Company before the War of independence. See Adam McKay’s movie, Vice (2018), starring Christian Bale as Dick Cheney and my serialized essay, ‘Notesonthelongcounter-revolution’ in Keith’s Newsletter.
Wall Street banks discovered a new way of making money. Whereas before banks lent money to people who had it, now they found that they could make more from lending to people who had little by deploying variable interest rates, fees, penalties, and default seizures. This has revolutionized banking worldwide, replacing an ersatz moral contract with naked predation (e.g., Schraten 2020 for South Africa).
The main recipe for national capitalism in the last century was mild inflation, giving house owners the nominal illusion that their property was making money for them, as it sometimes did. When I was starting out in the 1960s, my bank manager and I were on first name terms as middle-class professionals. The digital revolution made it possible for financial firms to gather unlimited personal information about customers and for decision-making to follow remote algorithms. With housing, cars, and smaller personal loans (mainly through credit cards) in the lead, whatever remained of human agency gave way to the assembly of housing contracts bundled into derivatives that made them tradable in financial markets. Before long, financial companies assembled rents paid by students to their dormitories in derivatives traded globally. They now encouraged people who could not afford to buy houses to do so, knowing that their property would end up with creditors at a much cheaper price than their real value.
Before the Lehman crash of September 2008, some sixty countries were growing at over 7 percent; soon there were only nine. The term ‘financialization’ is now on everyone’s lips, referring to the recent penetration of high finance, much of it issued by the shadow banking sector, into areas of personal life that had previously been immune to this.
According to the adage “what goes up must come down,” most lucrative investments since 1980 are all varieties of Ponzi scheme. It will end in tears. The interminable crises that beset our world have one common denominator: national capitalism reached its limit in the 1970s. Since then, governments wedded to transnational corporations, but sometimes at odds with them, have been orchestrating the demise of political and legal constraints on accumulation. Exceptions to this trend are the BRICS countries—Brazil, Russia, India, China, and South Africa— each of whom is trying to build a welfare state for citizens brought pell-mell into urban capitalism, while licensing criminal enrichment by the rulers.
The nation-state vehicle for society has been extremely powerful, bringing together five kinds of community—political, territorial, imagined or virtual, monetary, and a shared interest in trade and war. Many people cling to this as their only idea of how society can be made, especially in Western countries that benefited most. Already market fundamentalism (Hart 2018) has split between those want to leave the world and those who would join it. Authoritarian xenophobic nationalism challenges neoliberal globalization and the long-run impact of the covid pandemic has currently reinforced this trend.
Corporations plan to take over the world, but the vast majority are Asian and African
The corporations are quietly building a new world society to suit themselves. Money is already issued by a distributed global network of many more entities than governments and banks. There is no credible national policy left, yet many still believe that switching governing parties will solve everything. The main institutional reaction to the unraveling of national capitalism has been to form regional trading blocs of which the European Union was the leading example. These are coming unstuck, but they are the only intermediate stage toward a functioning world society. Something must be done to restore social democracy whose variety of associations might build a world society capable of regulating global capital.
The UN’s middle forecast is that in 2100 Asia will have 44 percent of the world’s population (60 percent in 2022), Africa 40 percent (18 percent), all the rest 16 percent, with Europe reduced to 6 percent compared with 25 percent in 1900—36 percent including the temperate zone lands of new settlement. The median age in Africa is now under twenty years; half the world’s children (18 and under) will be African in 2100. This is due to annual growth rates of 2.5 percent; everywhere else, the population is aging and in decline. Humanity’s future in this century will be decided by Asians and Africans, probably with the United States after a successful war. Asia will have the producers and Africa will have the most buoyant sector of world market demand, the US the weapons.
Land mortgages, Marx, and a human economy: the long view
We should not restrict our focus to contemporary trends, but rather take an anthropological perspective on the long history of money in society. An edited collection, Land and the Mortgage (Rodima-Taylor and Shipton 2021), does an admirable job of introducing much- needed diversity into such an anthropology. The topic of mortgages opens out onto the whole history of humanity’s relationship to the land, from the original conditions of hominid evolution to living in cities ruled by money.
In the Precapitalist Economic Formations of 1844, Karl Marx lays out a vision of human history in which capitalism is the final dissolvent of those forms of society linking us to an evolutionary past that we share with the animals (Hart 2013):
“The original conditions of production cannot initially be themselves produced. What requires explanation is not the unity of living and active human beings with the natural, inorganic conditions of their metabolism with nature; nor is this the result of a historic process. What we must explain is the separation of these inorganic conditions of human existence from this active existence, a separation which is only fully completed in the relationship between wage labor and capital”. (Marx 1973 [1858]: 489)
In making that break, he believed that capitalism was the enabling force for the emergence of a human society fully emancipated from primitive dependence on nature. Most of us would now reject that idea. It was, of course, not that society itself, but its midwife. Human evolution before capitalism, according to Marx, was marked by two processes: the individuation of the original animal herd and the separation of social life from its original matrix, the earth as laboratory. From his point of view, we were witnessing the apotheosis of capital as it frees itself from human, physical, and geographical encumbrances.
Berghahn’s HumanEconomy series, of which the land mortgage book is one, shares and rejects Marx’s conclusions. The capitalists’ utopia (money makes money all by itself, with minimal human intervention) is a dystopia, and it must be replaced by an economy that serves common human interests. This means putting people at the forefront, always with an eye on humanity. Marx joined the economists and their ilk in insisting on the separation of society from its original matrix in nature. If readers get nothing else from this volume, it affirms that humans, however degraded by their exploiters, are indispensable to the objective circumstances of their lives in nature and society.
A contemporary movement of heterodox economists and their fellow travelers, including me, in the World Economics Association wishes to connect the study of the economy to the real world; to make its findings more accessible to the public; and to place economic analysis within a framework that embraces humanity, the world we live in. Alfred Marshall ([1890] 1997), in his synthesis of the marginalist revolution, defined economics as “both a study of wealth and a branch of the study of man.” Marshall was Maynard Keynes’s teacher at Cambridge. He was a cooperative socialist, like Marcel Mauss and Beatrice and Sidney Webb, and developed a Hegelian theory of the welfare state (Hart 2023).
The ‘human economy’ approach (Hart 2008) shares these priorities. It is not an exclusive concept or method, but an umbrella term for a conversation between those who draw on a wide variety of intellectual and political precedents. We encourage work pitched in dialogue with related approaches operating under different labels. We encourage inquiry united by a desire to make the economy more human than we currently find it. We do not aim for an exclusive monopoly (‘our side’), but to help build a plural, inclusive, and decentralized global network.
The economy is not a remote object glimpsed occasionally online or on the TV news. It is an idea of how people should manage their lives with a view to getting by or improving their lot. The tradition of economic thought has addressed this question historically with variable success. In the current world crisis, we need to do better.
