Capitalism depends on cycles of destruction

by Herb Ruhs, MD

"Buy low and sell high" is the path to commercial success and the origin of political power in capitalist economies. We all have a little capitalist genie in our brains that lights up when the opportunity to make a profit occurs, even when it is at the expense of neighbors' suffering. The

The destruction of the lives of ordinary people caught up in this process is a necessary part of this cycle, from the point of view of those bargain hunters with cash -- to them it is an entirely good thing. For the very wealthy, having sympathy for the ordinary people destroyed by this imposed cycle would be like the farmer worrying about the wheat plant he is cutting down to harvest the grain.

destructive cycles of predatory capitalism owe their existence to a general inability to restrain this inborn thirst for gain.

The buy low and sell high compulsion of a capitalist economy is analogous to the planting and harvesting done by farmers. At the bottom of the economic cycle, which we are now entering, distressed properties like foreclosed homes and failing businesses can be bought up at a small percentage of their maximal value, with the anticipation of vast profits when prices begin to rise again as the result of the move, on the part of cash rich wealthy players, to begin investing again. For instance, right now, houses that sold recently for $400,000 are being picked up by investors for $100,000. These predatory investors expect triple digit profits from holding on to these properties until prices once again begin to rise.

The part played by winter in the agricultural system is played in unrestrained capitalist economies by investment capital deciding that prices have nearly finished their upward course, getting out of the market by selling early, and thus starting the downward spiral in prices. The deliberate goal and anticipated result of this withholding of capital is a general financial collapse that begins the process, analogous to the harvest, that will result in the transfer of wealth to the wealthiest, cash rich segments of the economy.

This is very much like the farmer who decides that the crop is ripe and stops irrigation in preparation for the harvest. But in the case of the farmers of the economy, the harvest is in the form of the wealth that has been built up by ordinary people in home equity, retirement accounts and so forth.

The destruction of the lives of ordinary people caught up in this process is a necessary part of this cycle, from the point of view of those bargain hunters with cash -- to them it is an entirely good thing. For the very wealthy, having sympathy for the ordinary people destroyed by this imposed cycle would be like the farmer worrying about the wheat plant he is cutting down to harvest the grain.

Any system that allows for great concentrations of wealth will display this kind of eager exploitation of deliberately engineered economic disasters. After long periods of economic growth, in the midst of the suffering, it becomes possible to see for a brief while how this evil system works. But as soon as reinvestment occurs and economic growth resumes, people suddenly go blind as a result of the encouragement they feel from a renewed access to wealth. The previous bad times are forgotten, and everyone joins in the good times unconscious of the fact that they are just digging the grave that they will be buried in when concentrated wealth decides the time has come.

Marx described this process well over a hundred years ago and precipitated various ideologies that sought to decouple the capitalist cycle. None worked very well, primarily because the top-heavy capitalist system of economic control was replaced by another top-heavy system of economic control that tended to produce stagnant economies which provide a misery of another, even less tolerable kind. Marx described what he foresaw as the final crisis of capitalism, when the repeated cycles of exploitation finally resulted in such an extreme concentration of wealth that the ability of the economy to recover was destroyed.

We may have come to this point now. If not now, then we will in one of the next few cycles. This is because this time the capitalist system has succeeded in destroying the basic natural resources that are needed for renewed growth. The soil of economic growth has played out ... and now the dust bowl comes.

Naomi Klein has written the most current description, drawing on contemporary facts and episodes, in her book The Shock Doctrine: The Rise of Disaster Capitalism. It is a wonderful book. My only reservation is that the title is redundant in that all capitalism, if unrestrained by an educated populace, is disaster capitalism. Capitalism depends on cycles of destruction to provide for the kinds of returns that capital always seeks from being able to buy distressed properties.

Many deep thinkers have come to the conclusion that capitalism itself, defined by the free buying and selling of capital assets, must come to an end. I remain unconvinced on the issue. To my observation all that is needed for a society to establish a sustainable, abundant economic system is to prevent the inevitable progressive concentration of wealth that is the result of unregulated capitalism. Money, like fire, is useful but very dangerous when it is allowed to grow too big.

Any society that wishes to escape the cycle of general economic destruction will need to invest in human capital, in education and opportunity, that shifts power from the privileged few to the ordinary person and allows for control from below to prevent obscene concentrations of economic power.

Real democracy, with active, well-educated participants, can stop the cycle of economic and accompanying environmental destruction. I can't see how anything else can. We owe it to our species to at least try, because otherwise we may succeed in driving ourselves to mass die-offs and perhaps eventual extinction.

So let's educate ourselves to tame the little genie in our own selves that gets excited about the prospect of becoming rich, so that we can effectively confront those out of control folks who are compulsively and unconsciously using their vast riches to lead us all into unrecoverable destruction.

If it is true, as gangsters always assert, that everyone has a price, then we are doomed. But I think the gangsters are wrong. That kind of sociopathic thinking is the result of early trauma and/or brain disease. I believe that the rest of us, with reasonably functional brains, can come together and pull this one out of the fire and come to enjoy a bright future.

But don't call me an optimist. Optimists miss out on all the good surprises. Call me a restrained pessimist.

Herb Ruhs, MD   

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