Turning Points of Capitalism

Capitalism is changing under the influence of developments that can be described as turning points. As the first quarter of the 21st century approaches, the world is faced with a changing capitalist process.

Until the Great Depression of 1929, the generally accepted “laissez-faire” style of capitalism could not provide a solution to the great unemployment problem brought on by the Great Depression. Clement Attlee, who became British Prime Minister in 1945 after World War II ended, broke new ground in both theory and practice with his economic model based on Keynes’ ideas. While Keynes guided Britain’s economic policies, he also opened a window to the world with his ideas.

The world after 1945 continued until 1971. The Bretton Woods system, which was the defining element of the post-World War II era, was ended by US President Nixon. In 1973, there was an oil crisis and oil prices nearly tripled. Then came recession and inflation. Keynes' revolutionary ideas and proposals had come to an end. Capitalism was at another turning point.

In the 1980s, deregulation, free markets and privatization became the main topics of economic policy. Globalization was the dominant concept of the period. After the Cold War, countries that opened up to the outside world were creating private sectors, starting international trade and increasing their incomes. After the Great Recession of 2008, a period began in which productivity and income growth stopped, income inequality became the main agenda item and the climate crisis questioned the way capitalism works.

The period after 2008 brought monetary policies to the forefront, not fiscal policies. Because a much more “financialized” world was created compared to the past. Central banks took the leading role in managing economies. With the impact of globalization, capital could now circulate freely internationally. After 2008, zero interest rate policy and monetary expansion were seen as the way to keep capitalist economies, whose productivity had decreased, on their feet. These methods were creating problems that were left to be solved in the future.

After the turning points it has experienced in the last 150 years, capitalism was entering the pre-Covid-19 era in a financially unstable, environmentally unsustainable, and politically discredited environment . On the other hand, a process was underway in which the market dominance of technology companies increased and oligopoly and even monopolization tendencies were strengthened .

Along with the negative economic developments, a process was also underway in which democracies were damaged one after another. Rising populism in politics was causing the popularity of politics to fall. A world where polarizations were evident in international relations and in the domestic politics and social life of some countries was increasingly making its weight felt. The political preferences of voters around the world were increasing the characteristics that forced politics to move away from democracy. Both politics and voters were moving away from democracy. A very important factor underlying this development was the negative developments experienced in the economy. The income generated was not being shared equally and the workforce was weakening against capital .

With the Covid-19 crisis, the need for a new definition of capitalism, the benefits of which are being questioned, has intensified. Russia’s invasion of Ukraine, on the other hand, necessitates a re-evaluation of views on where the world economy could evolve, outside of the international relations dimension of the Russia-China rapprochement.

Innovation was a frequently discussed topic throughout the Covid-19 crisis. Covid-19 had created economic devastation . Could the way out of this devastation be possible through “creative destruction” as described by economist Schumpeter? Innovation existed and was even accelerating with Covid-19, but it was also determined that it did not provide an increase in productivity as expected.

According to Robert J. Gordon , between 1870 and 1970, economic growth was greatly aided by inventions in five major areas: electricity, infrastructure that made healthy urban living possible, chemistry and medicine, the internal combustion engine, and modern communications. The foundations of the inventions date back to the late 19th century. The period when the development of inventions and their positive effects on growth reached their peak is between 1920 and 1970.

Whether or not one agrees with Robert J. Gordon’s findings is a different matter, but it is noteworthy that it offers a perspective of the relationship between innovation and growth that spans approximately 150 years. It is seen that there is a big difference in terms of creating efficiency between the inventions after 1870 and the inventions that started just before the 2000s and have continued to the present day. It can be determined that the direct effects that increase efficiency in the production and consumption relations and the change in working conditions were more dominant in the period starting with the 1870s.

If we look at the top 30 companies listed in the Dow Jones Industrial Average, which includes important institutions that have led the way in inventions at the company level, none of the companies on the list from 1928 are on this list today. Capitalism's turning points create major changes.

In today’s capitalism, there are lives that are being torn apart between the increasingly urban and rural areas. There are ruptures in production relations between the educated and the uneducated. At the country level, there are ruptures between the high and middle-income groups and the countries with increasing vulnerabilities. There is a lack of policy alternatives, helplessness and dependence of underdeveloped and developing countries on the developed world in policy-making. The rapprochement achieved with globalization is evolving to a point where ruptures are being experienced today. The rupture at this point points to a technical and social transformation within the capitalist order itself. There are also ideological and regime-based ruptures between countries.

According to various criteria, the differences in approaches to the economy between countries that were subjected to more democratic, less democratic, totalitarian, etc. qualifications became apparent. In the 1990s and 2000s, when globalization was intense, today's differences in approaches were not felt. Globalization provided a broad-based benefit, albeit at different levels. The marginal effects were very strong. It was too early to reveal the differences. However, the increasing inequalities between countries and within individual societies, especially after the 2008 crisis, paved the way for capitalism to reach another turning point.

Although there are no deep ideological differences between countries that have traditionally lived under capitalism and those that have changed regimes, as the Cold War did, there is a break from the rapprochement brought about by the globalization era. Today, countries that have changed regimes are on one side of the break, having become economically stronger . At this point, the economy is intertwined with international relations.

As capitalism passes through a turning point and especially questions its justice, four issues gain a particularly important dimension of necessity. The necessity to constantly keep the social changes created by technology companies under the microscope, the necessity to constantly regulate the employment market due to the imbalances created and that technology may create, the necessity to address the potential of financial markets to create instability, and the necessity to begin to solve serious environmental problems.

Will capitalism be able to solve these problems it has created by using its creative side, or will it become stuck and move towards collapse? We will continue to search for an answer to this question for years. With this environmental disaster, such a high population, and at the same time a capitalism that increasingly wants to throw the human factor out of its own wheels, I predict that the blockage process will continue for an unpredictable period. The frequent mention of the concept of the Great Reset during the days of the Covid-19 crisis had a meaning.