The End of Capitalism

An ideology that started with syphilis and ends with coronavirus.

As you know, capitalism arose in the 16th century from Puritan asceticism. Puritanism gained its popularity at the peak of the syphilis epidemic in Europe when monogamy and saving were dictated by the harsh reality of life. In 1517, Martin Luther nails his famous theses to the door of the church, in which he accuses the Catholic Church of deviating from Christian ideals, corruption, and selling of indulgences. These postulate new Puritan ethics, the pillars of which were labor, purity of morals, hoarding (the forerunner of private property), and the obligation to give capital for continuous growth (the church at that time prohibited usury). It was the Puritans who became the first settlers in North America, where they founded the first theocratic communes from which later arose par excellence — the capitalist state of the United States of America.

The syphilis epidemic led society to a transition from feudalism to capitalism, when the exhaustion of one model of societal development (ideology) led to the emergence of another. Pandemic has revealed the exhaustion of the capitalist development model like a litmus test. It is about time to look closely at the signs of this exhaustion. In 2020, the world saw for the first time negative oil prices, zero interest rates, and stock market rising along with unemployment and worsening economic conditions.

In the second quarter of 2020, the US Federal Reserve System (FRS) increased net government transfers by more than 12%, printing a record of $4 trillion. During the GFC in 2008, the government gave out more money than it received in taxes. Back then this difference was around 0.5%. Today fiscal incentives are 20 times greater than the tax revenue! Just a few years ago, the very idea of ​​buying out any junk assets by the Fed would have been seditious and anyone trying to voice this idea out loud would have lost their job. Today, no one even noticed that 7 pre-GFC Fed balances were poured into the US economy in just 4 months, and this is no longer considered a deviation from the indisputable FRS monetary dogma. Another landmark event — the Ayn Rand Institute receiving government support. The controversial institution promotes the best-selling book “Atlas Shrugged”, the anthem of capitalism, and a reference book to the philosophy of objectivism, which involves refusal of state aid and promotes free market.

Divergences

The term divergence is used primarily in biology and stock exchange trading. The author uses this term to explain a phenomenon that does not yet have an official term, but it is the principle of divergence that very accurately describes the changes taking place in society in connection with one of the main trends of modern capitalism — uncontrolled emission of money.

Divergence in the society and economy is deviation of the declared value of a product, service, or a form of social interaction from its true value. Zero rates, in plain language, mean one thing — money as a measure of value is worthless. Depreciation of money is one of the tectonic shifts of the modern capitalist paradigm. Those who follow the markets have probably noticed the difference between the price of physical and ‘paper’ gold. If you see a gold ounce on the derivatives exchange priced at $1,800, try visiting your local gold dealer and buying an ounce of physical metal at the same price. Especially if you try to spend a billion on physical gold. This experience will make you clear. The physical metal just isn’t there.

Quite an opposite pirouette was recently made by the oil futures when they plunged into negative territory, ruining many Russian traders, as the Moscow exchange continued to trade into negative territory. If you look at the charts of indices such as the Dow Jones and S&P 500, you find a strong upward trend, and if you look at the ratio of this same index to the money supply, you find a clear downward trend. It has already become bad manners to cite growing stock market indices against the backdrop of deteriorating economic indicators. This list of divergences is endless. They only indicate one thing — the markets no longer exist, which means there is no capitalism either.

If we turn to history, divergences have always been companions of feudalism and socialism. Under feudalism, negative divergences were the normality. Labor and services were paid for at a much lower rate than would reasonably be expected. The labor of peasants, skilled men, artists costed close to nothing. Sculptors and engineers were often paid paltry salaries. Sometimes only a small plate of stew. The contribution of these people to arts, sciences, and technology was appreciated much later.

Under socialism, on the other hand, positive divergences were in the order of things. Those who lived in the Soviet Union remember how, in order to buy something of good quality, they had to pay well in excess of the ticket price. Meat was widely sold for 1.8 rubles, yet actually, edible meat could only be bought from ‘the right person’ for 3.5–5 rubles. Right now we are headed to socialism, where everyone will be receiving money from the government, but there will be nothing to buy for it. When money is worth nothing, nothing is made for money. Divergences in capitalism take both forms when money does not cost anything and there is no incentive to produce something of high quality, so even if there is money, it will be very problematic to buy something of high quality.

The future prepares further divergences for us. Free money of falling purchasing power, increase of quantity and variety of goods with simultaneous fall of their quality and longevity, divergences between what people say and what they actually do, between the law and its enforcement, as public consensus deteriorates and governments lose control over social processes. These divergences lead the world as we know it to destruction. A strong and urgent need for the new social paradigm arises.

Real depression

In capitalism, production is strictly limited to consumption. We have stimulated consumption as much as we could. Before the second half of the 20 century, we expanded in space, making wars and taking over territories. The entire second half of the 20 century and the first 20 years of the 21 st century we have been expanding in time, borrowing against the future, inflating property markets, equity markets, printing money, and finally just giving money away for free. Anyone thought it could last forever? Nope. We have reached the natural limit of consumption, which means we have reached the natural limit of production. The very profit-making instruments that gloriously lead capitalism to its pinnacle have now degenerated to a point, where they produce no profit to their owners. Of course, we can print trillions more, but with every push of the ‘print’ button, more and more people are getting thrown out of the economy. This extends the simulacrum of capitalism for some but creates feudalism among others. The money we print eventually goes to the profit of the elites. Elites need to accelerate their profits to outstrip inflation.

The rest should ‘go get a job’. Inflation shows another divergence. It is high in luxury goods and equity markets and it is nearly deflation in the real economy. This divergence clearly shows where the money flows. Moreover, even if overproduction is miraculously overcome, the production itself no longer makes sense. Why invest in a business or a startup that pays off in ten years or even makes a loss, when adjusted for inflation, where you can invest in the markets and get a return that is, with our civilizational addiction to permanent growth, by all means, is nearly guaranteed?

In the absence of a real economy, all profits are derived exclusively from money printing. Equity markets have no longer anything to do with corporate profits. Stocks merely absorb emission. The more money we print, the higher the inflation in the luxury goods is, the more money we need to outstrip it. We have to print money with constantly increasing acceleration. And remember, with every push of the ‘print’ button, more and more people end up on the street.

There is a simple rule in the economy. Inflation always ends with deflation. At some point, money supply has to be pegged to something physical that cannot be printed at will. This used to be wheat, oil gold, or silver throughout history, or even the US dollar when it was solid enough. No matter what is used, pegging the currency to something physical causes severe deflationary shock and leaves the economy with no liquidity in a matter of weeks. It is customary in the capitalist's world to criticize Marx. One thing he was right about is that since capitalism requires permanent expansion, it is naturally unstable. Marx thought that capitalism would slide into socialism. It is clear now that feudalism is the other option.

One of the ways to battle the adverse effects of money printing is crypto money like bitcoin, which can be given certain mathematical attributes, such as limited validity or non-linear exchange rate. An employee receives $10,000 salary, of which $5,000 disappears a month later, another $3,000 disappears in twelve months, another $1,000 stays for 10 years and the last $1,000 stays for 100 years. Money becomes a function of not only the amount, but also the date of the transaction. It destroys itself. This technology is implemented in Etherium, and is called Gas, part of the token burns out during a transaction or on an “alarm clock”. This function helps avoid double-spending and as payment for using the computing power of the system and is hardly meaningful in any other sense. Blockchain technology is a laboratory for testing various concepts of new money, but nothing more. It is still too damp, with many young people that do not quite understand the difference between playing games and re-engineering the entire world monetary system and social relations.

The world's financial elites may have a couple more cards up their sleeves. Central banks can buy all the debt on 10-year buy-back agreements. These agreements can even start 10 years from the date of purchase, giving the world full debt relief for the next 20 years. The economy ends up with tonnes of liquidity, and we will enjoy economic boom for years. This debt will become much easier to buy back from the central bank in 20 years, as it will shrink with inflation. And if worse comes to worst, in 20 years the trick can be repeated. If the elites come up with this, they can forget about crises for the next 30–50 years. Such dances with monetary tambourines deliver the same results — each time we need to print more. As long as we can pretend that the capitalism horse is alive, no one will ever want to recognize that it is dead, and we need something new.

A new paradigm

Let us start with the few realities of capitalism.
1. In order for someone to live better than others, someone must live worse. This follows from the definition of the comparative word better. Yes, they will tell you that during the last 40 years of capitalism people who lived on $1/day started living on $3/day. They forget to add that 40 years ago the total monetary base was a little over $150 billion, and now it is over 7 trillion. 46.67 TIMES increase. It means today's $3 equal to 6.43 CENTS 40 years ago.
2. The number of those living significantly worse today greatly exceeds the number of those who live significantly better. 43.6% of the population live on less than $5.5/day. Oh, and that’s that data as of 2017. You can imagine, 2020 hasn’t made these people rich.
2. Ideology is a common understanding of what’s cool, what’s not cool, how to reach the cool in a cool way, what are not-so-cool ways of reaching the cool.
Surely many readers will not agree with this wording. They might think capitalism is about progress, about the invisible hand of the market, which gently strokes the curly consumer’s hair and carefully regulates the markets for the benefit of the burger eater with double cheese and cola. However, let’s return to the harsh reality, and call a spade a spade for a moment.

The system comprises beneficiaries (profit recipients) and maleficiaries (profit victims). None of you, dear readers, of course, recognize the sacrifice of profit in the transactions you make, this is normal. Had maleficiaries known that they were maleficiaries, their susceptibility to capitalist ideology would be significantly lower. Ideology is a smart trick to get the maleficiaries to agree with their position and to believe that they will somehow become beneficiaries one day. Ideology even shows you sparkling stories of success, but never tells you the story of hundreds of millions of failures.
In reality, maleficiaries have to stay where they are and never become beneficiaries. Ideology has been with people probably for as long as fire has. During the Middle Ages, Christianity was the ideology. One god is an idea that translates perfectly into the idea of one king and one master. What’s the reward? You will not survive to see it. You have to die first. If you misbehave, though, you get punished twice, on Earth and in Heaven. Capitalists ideology offered a much more advanced and attractive concept of paradise — consumer paradise. Boring ideology of soul salvation was replaced with the fun ideology of personal enrichment. It became cool to make money, invest, and consume. If you are a good boy, you work hard, spend money and borrow, your reward can be showcased as a standard infomercial: huge mansion, flying money, golden trinkets, cars, and girls. If you are a bad boy, no sweets for you. You are a deadbeat loser.

Socialism offered an orthogonal ideology. Under socialism, it was cool to work for the welfare of the society, to selflessly believe in the ideals of the party and communism. Rewards included certificates, medals, privileges, and, most importantly, a career. It was not cool to be lazy, to plunder socialist property, to make a profit, and to play jazz. We only guess that the latter was simply associated with all of the former. Socialist ideology also didn’t bother with afterlife. If you were to break the rules, carma came immediately in a form of incarceration or execution. The best scapegoat is a dead scapegoat. It can be pointed at with the words: “See? It’s dead! You want to be like it?” When they tell you to hold on to capitalism because otherwise there is going to be communism, it’s ideology. There is an infinite amount of choices. One thing you have to remember is that the poorest and unhealthy countries in Africa and South-East Asia are mostly capitalists, and countries like Norway and Sweeden are socialist. Executions and incarcerations are not part of socialism. They are a part of ill society, regardless of ideology.

As mentioned earlier, the ideology of capitalism assumes that beneficiaries can be beneficiaries only as long as the maleficiaries firmly believe in the ideology and agree to be maleficiaries, hoping to become beneficiaries one day. The entire history of capitalism is the history of market manipulation, where maleficiaries work throughout their lives, make savings make plans for a happy retirement, but something always happens: a market crash, inflation, deflation, banking crisis, something that inevitably takes away the accumulated wealth from the maleficiaries and distributes it in favor of the beneficiaries.

Sooner or later maleficiaries become to understand that there are no real ways to become beneficiaries. Ideology feeds us simulacra to sustain the status quo. As soon as this obvious thought penetrates the minds of the maleficiaries, faith in the golden calf (or the bronze calf from the Wall Street) disappears, stagnation and degeneration of society set in. It becomes that you can work your entire life to accumulate a million dollars and the government can print 3 trillion in four months, diluting your savings by half, thoughing you 30 years back in your career, except not giving you extra time nor the opportunity to mitigate the damage. Two-three of those ‘print’ button pushes, and you are on the street with your memories of how you used to be a millionaire. Why is that? Of course, because you are lazy and you have to find a job to support yourself. Until recently, beneficiaries needed maleficiaries to make a profit off the system. With the degeneration of production, all the real profits are made in higher derivatives, without much production of anything useful for society. As a result, an irreversible process of devaluation of everything is launched: people, their labor, its products, services, education, science, health care, art, politics, etc.

When money is the ultimate goal of everything, money is the only thing produced. Anything that does not fit into this paradigm, such as quality, reliability, durability, will be cut off as in the Procrustean bed. A prime example of this is the recent discontinuation of the legendary “Segway” scooter. According to the company president, Judy Kai, the main reason for the low profitability of the project was the ultra-reliable design of the vehicle, where several backup systems were initially laid to maintain the operation of the electric scooter, even in the event of failure of individual elements. A person who once bought a segway could simply use eternally, without buying any parts or service packages and without spending money on warranty service. Something that does not break, does not need a replacement. The business model of modern capitalism is based on the constant replacement of poor quality products with even poorer quality products. It is a constant flow of resources into waste with a short period when they are formed into something useful.

What will be the next ideology that can take all the good from socialism and capitalism and leave all the bad to history? Opposites tend to interchange with each other. The current level of individualism and selfishness suggests a new wave of altruism and public service. Both capitalism and socialism began with the idea that one’s welfare may advance through one’s contributions to society and receiving rewards from it. Ideology is something that can motivate people to contribute. All that is required, is a wide campaign that shows how cool it is to give. The USSR forced people to contribute, just like the USA is now forcing people to spend and borrow. People don’t like being forced. People like being persuaded. Smart governments understand that stupid government use force. Now the synonym for success is passive income. I bought a property and rented it out. I do nothing and make a profit. Or I post photos on Instagram and make funny videos for Youtube. I am cool. None of the youth today dreams of producing something, of becoming a shoemaker or a mill operator. An average farmer in the developed world is nearly 60. 20 years from now there will be none. Their children and grandchildren prefer to make money on Instagram. We can only see a new economic cycle when being a shoemaker or a mill operate is cool again.

A stable altruistic society is possible only among highly conscious people who understand that public interests are higher than the personal ones. Ideology is distributed in society through public institutions, such as schools, universities, media, etc. The society of primitive profit makers and consumers has become obsolete. We now need a society of highly intelligent thinkers and creators, self-determined, and with a natural desire to contribute to society. This means we need a high quality free educational system, that is not there for the profit of shareholders, but for the benefit of the entire society.

We are living in a one-dimentional world. Anything we see, feel, think, or do is measuren on one scale — money. You can be a genius and think of breakthrough technology, but if it interferes with someone’s profits, it will be buried in bureaucracy and never sees the light. Reality has an infinite amount of dimentions. If we only introduce a multi-dimentional society, where the money is not the only one most important measure of everything, we might be able to see multi-dimentional things and ideas. Most importantly, multi-dimentional society allows you to be a multi-dimentional person, not just a moneymaker and consumer. It was the dead-end of social model development, not the coronavirus, that provoked the global crisis that we are
witnessing right now. The pandemic only showed that we need other scales to evaluate societal processes, not just
money.

Denis Bulavin, Rodney Morris