How Capitalism Short Circuited Communism with Wet Feet


One of the news items I remember from the 90s (probably because of the sheer number of times it was repeated in the Indian Media) was the US constantly preaching to India and rest of the developing world to “open up” their economies. I remember asking my father why we  just don’t do that, to which he basically replied that people were afraid of unemployment and capital flight.

Fast forward 20-25 years to the present, there is bipartisan support in the US to the idea that international trade deals are ruining their economy, that developing countries like China and India (which have now “opened up” their economies) are “stealing” jobs and other resources from the US and basically that an open economy with free movement of goods, services and labour is bad for the US economy.

But the US is not alone in expressing these sentiments. Many of its ideological allies in Western Europe who have been preaching similar things to the countries of the developing world about embracing the neo-liberal economic model have just in the past one year witnessed massive opposition to free trade agreements between EU and Canada and EU and the US

This is a significant turnaround for these countries which have been preaching “free trade” and practicing the modern version of capitalism for at least the last 70 years. Why did this turnaround happen? It happened because the US and Western Europe decided to borrow some ideas from Communism to make capitalism look acceptable without necessarily thinking about its future implications. This is what I am calling short circuiting communism.

The End of History

But before I proceed any further I would like everyone who is still reading this to stop being a Fukuyamaist for a moment. I agree with Slavoj Zizek that although I find Francis Fukuyama’s thesis in “The End of History” unpalatable, but he did get something right. After the Cold War, somehow we have all come to accept the status quo i.e. neo-liberal notion of democracy as the end of all polity. No longer do we see mainstream discussions regarding any alternative to liberal democracy. As a result of which we now have a growing epidemic of people who think that “politics is bad” and that somehow they can live their lives devoid of political opinions and decisions. If now you are thinking that your politics is being nice to people by practicing political correctness- I am including you too in the group of people affected by this epidemic.

Lets look at an example to make myself clearer. When we compare the ideas of US President Donald Trump and possibly his most virulent critique in US media the British comedian John Oliver, we see that on the surface both men do not seem to agree on anything. But if we look deeper we see that both men are just proposing their own different ideas regarding how best to preserve the neo-liberal world order. Essentially both are gate-keepers of the present capitalist world with Oliver advocating more social welfare and Trump advocating more competition for preserving the status quo.

Keep in mind that status quo is never “home” but it is usually where most of the “violence” happens, be it political, physical, psychological or societal because-

“Home is not where you are born; home is where all your attempts to escape cease.”

– Naguib Mahfouz (1911-2006) – Egyptian writer & novelist; won the Nobel Prize for Literature in 1988.

Scary Sounding Communist Terms and what they really mean

The current crisis in the neo-liberal world is due to capitalism adopting the classical Marxist idea of “withering away of the states” and employing it to meet their own needs.

Marxism is quite clear about how this stage in world’s history where there is withering away of the states will come about and their explanation, even though some might argue is impractical, is at least theoretically possible. This theory goes something like this- the world is ruled by bourgeoisie or people who control the means of production i.e. capital, land and labour- there will be a revolution where the working class or the proletariat will overthrow the bourgeoisie and then end their control over the means of production and there will be a classless society.  But since years of bourgeoisie rule has created various contradictions within each society, each country where there has been a proletariat revolution will have to deal with their own dialectic materialism. Only when each country had dealt with their own contradictions or reached a synthesis after dealing with their dialectical materialism, only then will it lead to a truly classless society across the world, which will in turn lead to an automatic “withering away of the state”. The operative word here is “automatic” not “assisted” or “forced”.


Now, let us come to capitalism. Capitalism is based on the belief that humans are rational animals and thus always looking to maximise their profit. According to capitalism, it is only when everyone works for their own profit can there be an ideal society where everyone’s needs and wants are fulfilled. So, capitalism is more concerned with ensuring economic freedom than with equality. In fact inequality is what drives the engine of capitalist growth- competition. So, when you hear terms like “the free world” it basically means the capitalist world. In the capitalist world view limitations like making provisions for equal opportunities are seen as barriers.

Whether you agree with what the ideology of capitalism says or not, it is not the point here. What matters is that communism and capitalism are completely different ideologies and there is no way that something like the communist idea about “withering away of the state” can be truly integrated into capitalism. But, frankly weirder things have happened in world history and this concept was adopted into the capitalist worldview and was labelled “globalization”. It is this decision to monetize “withering away of the state” without fully considering its possible political outcomes which has now resulted in internal contradictions within our societies as a result of Dialectic Materialism or in other words- unequal struggle for finite resources.

The primary rouse for convincing people about the benefits of “globalization” has been the concept of freedom. I will explain how capitalism has successfully used this concept till now but first we need to understand why capitalism felt the need to make provision for equal access to the market into a core element of their ideology although it is clearly counter-intuitive to their original beliefs regarding competition and practices like colonialism where different sections of capitalists would lay claim to different captive markets.

Different countries adopted globalisation and free trade for different reasons but I am giving a small explanation below regarding the three reasons why the US, the engine behind the growth of modern capitalism in the world and main power behind organisations like the IMF, World Bank and WTO adopted these ideas.

Modern Economic History of the United States of America in Brief

The Great Depression hit the US in 1929, the government tried using protectionism and closing off the US from the rest of the world, but that failed. Then Keynesian measures were undertaken in the form of the “New Deal”, it helped a little bit but real prosperity came only after the Second World War because frankly the New Deal was not Keynesian enough and only the World War resulted in significant capacity expansion through massive capital investment in the US. The results of this can be seen in Kuznet’s inverted U curve regarding initial increase in people’s income.

During the 20 year period from mid 40s to mid -60s, the US economy not only became the largest economy in the world but also the largest producer of both primary and secondary goods. For them to make a profit from such massive production they needed foreign markets as the domestic market alone would simply not do. This resulted in the perennial hunt for markets by the US. These economic circumstances also led to the creation of large number of scholarship in the Western world (specifically in the US and UK) which proposed increased free trade as a panacea for all evil be it poverty, war or oppression of minorities and women. This is the first reason.

Fun Fact: The last Indian Prime Minister, Manmohan Singh became heavily influenced by this school of thought while he was doing his PhD in Economics in Cambridge University and probably that was the reason why he decided to stay silent when problems of varying degree of severity were put in front of him.

But what happened after those 20 years. Well, two things happened one was more nuanced and more relevant to the decline in economic growth of the US in the 60s and 70s and the other was sudden and impacted the lives of millions of US citizens and thus remained in their memories longer.

The more nuanced and relevant thing which begin to happen to the US economy from the 60s till its literal halt in the mid-70s has been explained brilliantly by the US economist Mancur Olson in the book below.

We have to keep in mind that he was writing this book when we were witnessing the US economy stagnating and the world was witnessing the Wirtschaftwunder or economic wonder in Germany and Japan which had by then overcome the devastation that WW2 caused to their countries and were growing rapidly. Olson concluded that the American capitalist class as a group which grew and flourished after WW2 by innovating and providing public goods is now over-burdened with too many people who have given up on entrepreneurship in favour of maintaining the status quo and being part of the “group”, which brought easy profits. Olson said that this happened because membership of this group was not based on performance and taking collective action for change cost a lot when there is a large group involved rather than when it involves a smaller group like in Japan in the 1960s. Ironically Japanese capitalism faced the same problem which resulted in what the Japanese call the “Lost Generation”.

But what remained in people’s minds were not these subtle things about increased cost of collective action but the sudden oil crisis of 1973 as a result of the embargo imposed by the Arab Oil Exporting countries, as a consequence of the Yom-Kippur War. Oil prices shot up by around 400% in the US and even when people were ready to pay up this exorbitant amount they found that their gas stations had already dried up due to lack of supply. This came as a great shock to the US economy and there was a feeling of “never again” and so this is the second reason for why US adopted globalization and free trade principles whole heartedly.

But overall the 70s remained a depressing time for the US in many aspects- economically, socially and diplomatically, so much so that the Americans decided to elect a B list movie actor as their president to lead them into the 80s.

Ronald Reagan did three things to revitalise the US economy- the first is well known, the second is not and the third is completely ignored by different people for different reasons. What Reagan did was firstly start the process of rationalising regulations governing American businesses, secondly spent huge amount of public money to increase demand and thirdly began focusing on establishing trade relations with third world countries most significantly with India and China.

The results of these steps can be seen clearly only during the Clinton presidency. Burdened by the huge debt of his two Republican predecessors Bill Clinton began to advocate for “small government” which was basically also a continuation of the relaxation of regulations which was started in earnest during the Reagan presidency. Clinton also had to restart, maintain or enhance the trade relations between the US and China and between US and India despite the former engaging in ruthless suppression of democratic right and the latter carrying out a successful nuclear test. There were many reasons why these things happened but the most important is of course the pressure of the US corporates on the US administration to facilitate and open up new markets and investment avenues for them and the US government after having relaxed regulations for more than a decade and sizing itself down had no way to resist this pressure. This was the third reason.

Dialectical Materialism

The communist concept of “withering away of the state”, is based on the pre-condition that there is at least some form of harmonious existence amongst all people in the world, that national or identical concerns no longer become reasons for conflict and where some kind of solution has been found for the problem of inequality. Do you think globalization, achieved any of those goals? No, absolutely not. Instead of harmonious existence we see walls being built everywhere from Israel to the US and from Germany to Eastern Europe. Instead of national identities ceasing to be reason for conflicts it has become even more contentious than it was 10 or 20 years before with some countries squabbling over sub-national or ethno-national interests like in the UK and Spain. Finally when all of this is taking place inequality has gone through the roof across most of the world.

But how could such a minor thing like capitalism borrowing a concept from communism and implementing/monetizing it could cause such chaos? It is because it managed to stagnate human advancement. Let me explain with the following examples.

It is my belief that capitalism knows that it had hijacked the communist idea of “withering away of the states” and replaced it with “globalization”, so they have tried to mitigate the obvious problems with their own versions of enlightenment concepts like “freedom” and “tolerance”.

Let us start with “tolerance” first. We might perceive it from the simplistic notion that since capitalism has lessened the state’s powers, increased the size of the economy and reduced barriers to free movement of labour and capital, it wants us to be more tolerant to the different kinds of people we meet in our day to day lives. But the reason behind this show of “tolerance” is something more basic than that and reveals itself when we ask ourselves the following question- that when under capitalism there is constant competition for limited amounts of resource, how can there be real “tolerance” amongst people? To answer this question we must consider what might possibly be one of the biggest achievements of capitalism which is to morph this struggle for more resources into something which can be carried out non-violently, 5 days a week from 9-5. This was more out of necessity than altruism because violent competition for resources leads to instability which as we know is “bad for business”.

But of course there are breaks in this routine when wars break out. But this is natural and common occurrence in a capitalist world ruled by greed. But what is unnatural is the short-sightedness of the people who are opposed to wars, do they not realise that just because they want “peace” does not essentially make them anti-war. Have they not asked themselves the question- when has competition for resources not led to wars and conflicts? The realisations that we all who participate in capitalism somehow or other contribute to war are suppressed with the help of two tricks- free movement of capital across borders and consumerism.

Since the neo-liberal world has managed to establish the free movement of capital across borders, we neither see nor know of the damage that our capital is doing-all these add an element of plausible deniability. But since there are only finite resources in the world and capitalism involves competition for those, our very participation in economical social interactions with other people results in gain for one and deprivation for the other.

The element of plausible deniability is also strengthened with the excuse that most people’s jobs have nothing to do with violence or war. But this is not how things work in Capitalism.

Let us consider another Marxist term – “surplus value”. Surplus value is the value created by the labourer in addition to what they are paid wages for. It is by appropriation of this surplus value that the capitalists profit. Our investments in stocks are based on the trust that capitalists will continue to be able to appropriate the surplus value even in the future. So, it is through this expropriation of surplus value that the neo-liberal capitalist world can afford to pay the workers and invest in new ventures. So, even if you are completely against war your participation in the capitalist world makes you not only fund wars but also profit from it, even though it may not be obvious. This is because in a neo-liberal world everything is connected by capital and human interaction without capital has become next to impossible. To explain it with a movie reference, it is not “Love which is all around us”, it is capital that is all around us (Love Actually).

So, in other words, the very enthusiastic neo-liberal anti-war and peace activists forget that war in a capitalistic world system is just doing something quicker rather than what many of them do for years from 9-5 every day. This naivety about their role in wars and violence also seeps into the discussions when liberals talk about consequences of war like accepting refugees of war. Accepting refugees of war is a noble act but has its own elements of vulgarity under capitalism. This is because the refugees have not only fled a capitalist war for profits but because the country which will accept them will turn them into cheap labour for creating even more profits in no time. I wonder how many wars it will take for the people to realise that they are going around in circles, unfortunately, this question is rhetorical. There is no way people in the capitalist world can break out from the vicious circle of the debates we find ourselves in if we do not decide to question when and how we got indoctrinated into this neo-liberal capitalist world and if we really want to spend the rest of our live in it. The capitalist world, especially the developed Western world have found a way to make people forget the unpleasantness of capitalism by projecting its positive side vis a vas consumerism. Almost all their customs, cultural activities, hobbies (sports) and even spirituality have been covered under the halo of consumerism. But unlike the halo of saints, angels and Gods which looked unattainable or attainable only after death the things under the halo of consumerism can be ordered with a click of a button on your phone. Religion is no longer the opium of the masses but is just a subset within the hallucinogenic superset of consumerism.

To understand how this works we have to understand the concept of “freedom” in a capitalist neo-liberal world. To start with the primary concern of capitalism was “Free trade” but as capitalism grew in power and hence in confidence it expanded itself to include other forms of freedom like freedom of expression. For how can there be a danger to the capitalist world order when the means of communication is controlled by the capitalists? With the coming of the social media the dangers to the capitalist world system has receded even further because who can hear someone when everyone is shouting? This in turn leads people to retreat into echo chambers where they share their opinions on different issue with people of similar disposition. The real tragedy here is that many of those differently aligned echo chambers are worried about the same issues. But in a capitalist world where everyone is addicted to consumerism anything can be commoditized and competition ensures that that commodity is mass produced. So, the reason why we now find ourselves facing this historically unparalleled difficulty in discussing differing opinions is because of this mass production of information which results in the phenomenon called information overload. It doesn’t matter whether the information is real or false here, too much information usually exists on all sides of an argument to lead to its eventual failure.


The power and control of capitalism over information is especially evident when one looks at the weird evolution of the phenomenon of information overload. More information than it could be processed by the human brain existed before the internet age. But it was grudgingly accepted that one can be a true expert in only one field of work. But strangely with the coming of the internet age where there was growth in the number of specialized subjects there was also the growth of this infantile notion that the truly intelligent people knows everything about everything. This notion is not only reinforced through fictional portrayal of intelligent people knowing everything but also in real life for example when big seminars are held where theoretical physicists like Prof. Stephen Hawking will tell people that communication with an alien species will be disastrous for humans. Prof. Hawking’s work mostly involved reams of papers or to use a modern term terabytes of mathematical calculations. How can he know anything about alien psychology or sociology? That is why he falls back on the problematic historical theory called “Columbian Exchange” while discussing a probable event of contact with intelligent alien life form.

But nonetheless, these fictional and non-fictional accounts of “intelligent” people knowing everything serves its purpose well because who doesn’t desire to be intelligent, and if being intelligent means knowing everything about everything so be it. But since knowing everything about everything is impossible, at the slightest challenge “intelligence” disintegrates into opinions which are often just thinly veiled dogmas. This is why we see so many people discussing and presenting their strong reservations about topics on which they seemingly have very little idea about


As seen from above neo-liberal ideas like “tolerance” and “freedom” does not really have to do anything with tolerance and freedom but are fire-fighting measures of capitalism because they have realised that they might catch fire because they had short-circuited a complicated Communist idea while they were standing in an ocean created by capital. Anyone who is reading this must have on one occasion or another in the last decade encountered a situation when they tried defending basic ideas like freedom but was opposed by another whose objective was to defend freedom as well. This is what has led to the crisis in the neo-liberal world order and why neo-liberal critique of increasingly right-winged nationalist polity is meaningless and irrelevant because both inhabit the same area whose boundaries are fixed by capitalism.

Civilisation cannot hope to advance by simply critiquing the wrong information, by arguing about human morality and making fun of the everyday ridiculousness due to the above mentioned phenomenon of information overload and creation of echo chambers. Civilization can only advance when we either disregard the borders that bound us or when we expand them and the first step towards doing this is to stop being a Fukuyamaist and look for an alternative where the primary means of human interaction is not through capital. I know it is a lot to ask, especially when you are probably reading this in a device manufactured by a multinational corporation and when I am writing this in a software created by a multinational corporation, but never forget that just 2 to 3 hundred years back most people lived in a world which was not governed by capital. Of course, it was a world where the more dominant elements were feudal considerations, but human civilization did advance into the “Age of Capital”. To suppose that we cannot advance beyond this stage will not only be a disservice to humanity but also will be a terrible underestimation of our potential.