Hard times always bring to surface questions about the sanctity and the viability of an economic system. The Ancien Régime, established in France from the 15th through the 18th centuries, failed when hard times hit because too many people felt the economic system’s sanctity and viability were skewed in favor of too few people. Queen Marie Antoinette may not have actually said, “Let them eat cake,” but this historical bit of triviality did not stop Henri Sanson from taking off her head before a crowd numbering tens of thousands; on the scaffold she accidentally stepped on his foot, and her last words were: “Monsieur, I ask your pardon. I did not do it on purpose.”
On June 21, 1791 the king, queen, and their attendants fled their Paris residences, whisked away in carriages, as masses of hungry protestors roamed the streets. The forewarnings were there years beforehand. On August 20, 1986, Finance Minister Calonne informed Louis that the royal finances were insolvent. Hard times hit. Six months later the First Assembly of Notables met, demonstrating resistance to imposition of taxes and fiscal reforms. It was nearly three years later April 27th, 1789 when the Reveillon Riot in Paris, caused by low wages and food shortages, led to about 25 deaths by troops. The Storming of the Bastille occurred July 14th and on July 17 the beginning of the Great Fear took command of the streets as the peasantry revolted against the economic system of the day. Amid a number of urban disturbances and revolts, members of the aristocracy, holding onto their heads, fled Paris to become émigrés.
History shows it does not matter whether an economic system is based upon feudalism or capitalism or socialism, or any ism. When it fails to accommodate the masses, the masses force change. Is capitalism the answer to, or the cause of, economic failure today? Stalwarts of capitalism like the United States, the UK, Italy, Spain, France, and Portugal have already had their turn at providing the answers and more questions than answers have now arisen. Are the tenets of capitalism, i.e., private property, competition, market-based, economic freedom, consumer sovereignty, and laissez faire today’s equivalent of the Ancien Régime circa 18th century? The answer is: There are ominous signs the masses are once again seeking change; after all, the president of the United States was recently elected on an amorphous promise of “change.” People are searching for it, and the operative question is: Why, if not for a failed economic system?
There should be little doubt that the 2008 financial meltdown influenced voters to vote for change in November 2008. The citizenry witnessed, live on the news and on Wall Street and in home ownership, the withering of capitalism, and as of today, every American knows the name Goldman Sachs, the catchword for failed policies for the republic at large but the savior of the aristocratic few. The question remains: Are the masses taking to the streets and where and why and how does capitalism play a role?
In February 2011, a series of public employee protests began in the United States, specifically in Wisconsin, spreading to Ohio and Indiana, demonstrating against economic infringements threatened by state governments, part of America’s Ancien Régime. Sympathizers at New York City demonstrations held signs reading, “Wall St is destroying America.” Of course, capitalism knows no borders, and across Europe thousands take to the streets to demonstrate against austerity programs, stating: “We are not about to roll over. Bankers played dice with our futures, why are we paying for it?” A common thread runs through the mindset and words of protestors across Europe and within America, and that theme is the pinnacles of capitalism have floundered, and/or the system sucks! It really does not matter which, trouble is a’ brewing, and the heartbeat of capitalism is on the firing line. Nor does it matter whether too much government or too much favoritism for the rich causes today’s economic problems; people in the streets see a failing economic system whatever is the cause, and the economic engine behind the problems is capitalism. Of course capitalism, a la the Great Depression, has already demonstrated its enduring qualities; however, time has passed and there is no Great War on the horizon to serve as a renaissance for use of capital. In fact, it may be that capital has been overly abused, and its opportunities for renaissance are a faded memory. American capitalism’s long shadow, covering worldwide problems for over seven decades, has turned tail, immersed within. The formidable Fed has suddenly changed colors from bright green as in ‘go get’em’ to a pale yellow as in ‘pushing on a string’ for the first time in memory! Something is wrong! According to Alan Greenspan in a CNBC interview on June 30th, the $2,000,000,000,000 quantative easing the past two years: “There is no evidence that huge inflow of money into the system basically worked.” Yeah, but since WWII massive Fed easing has always juiced up the economy! Something really serious is wrong! The Fed’s balance sheet looks like a hockey stick at $2,869,000,000,000 and is more leveraged today, over 50-to-1, than was Bear Stearns or Fannie Mae. If the Fed was an ordinary bank, regulators would shut it down; however, by any measurement, the economy should be screaming, not floundering, with so much moola sloshing around. Nothing is happening according to the textbooks.
Every economic cycle has a beat or a rhythm unique to the times, but none has had such pervasiveness across the capitalistic world as the current one; no it is not a depression in the classical sense, but it may be a depression for more people on an absolute basis, and possibly on a relative basis, anecdotally speaking, than ever before, time will tell. What is certain, however, is a palpable tension is spreading across the lands, an undercurrent coming to surface sparked by global capitalism, providing a pathway for the invisible hand to find the cheapest labor in the least amount of time, a process undermining the very basis of a fluid, functioning capitalistic structure, a strong middle class. Thus, upsetting a time-honored formula for successful capitalism by reverting to the timeworn and dissipated economy of the 18th century Ancien Régime when “let them eat cake” literally had a perversely jovial meaning and a harsh means of enforcement, until the authorities pushed and they, the masses, pushed back.
Capitalism may be a spent economic theory, outmoded, not up to the job of accommodating a world where too many have way too little. Ironically, the ingenuity promulgated by capitalism’s tenets may be its Achilles heel because a world devoted to self-interests does not have enough assets for the invisible hand of the market, which is supposed to guide people to act in the public interest by following their own self-interest. Without going through very complicated and boring mathematical formulas, one can reasonably assume there are way too many people to meet everybody’s self-interest, especially when self-interest is dramatically unfettered, damned to the public interests. Something has to give because the capitalist economy, if its own key tenet of self-interest is adhered to, does not have enough to go around because it is not true, as stated by Adam Smith, that the invisible hand of the market guides people to act in the public interests by following their own self-interest. This theory has been thoroughly dispelled by the 10% that control 90%.
A case can be made that the Ancien Régime only stumbled in the 18th century and thrives more today than ever before because, in reality, no matter what you call it, then and now, it still amounts to 10% owning 90%. The self-interest doctrine of Adam Smith really works for the top 10%, but you have to wonder if the guillotine will ever make a come back!
Robert Hunziker earned an MA in economic history at DePaul University. He lives in Los Angeles.