The answer is very likely ‘yes’. The demise of capitalism has been predicted many times since Karl Marx proposed that it would collapse because of its contradictions but it has proven to be remarkably resilient. What usually happens is that following crises, capitalism takes on new forms to escape being taken down completely,. Capitalism, like socialism, is an umbrella term that encompasses many different varieties, from the libertarian laissez faire form whose adherents have a deep belief that any government is unnecessary because the invisible hand of the market will take care of things, to social democratic forms where the government plays a big role in regulating the market and providing a social safety net for its people to shield them from the ravages of extreme capitalism.
As all of us live through this bizarre experience of a pandemic that has shut down pretty much the entire globe, one thing that might keep us going is the belief that at some point this will come to an end and that things will get back to normal. But what will that new normal look like? It is hard to predict but one thing that we can be sure of is that we will be faced with major changes.
What this, and previous crises like the Great Depression, World War II, and the 2008 financial crisis have shown is that the laissez faire form of capitalism is utterly incapable of delivering the goods at times like this. In times of crisis, everyone becomes a Keynesian, with governments playing a huge role by pumping money into the economy to stimulate the economy by enabling growth and employment. But these failures will not completely get rid of these advocates of extreme capitalists because they are true believers. Once this crisis passes, they will re-emerge with their mantra that government is the problem, not the solution.
In the US in particular we have seen the failure of its form of capitalism that is more extreme than found in most developed countries. The lack of free universal health care has made the pandemic problems worse. The lack of a social safety net has frightening consequences for millions of people who live on the margins. We have seen multiple studies about how many families in the US do not have access to even a few hundred dollars in savings in order to meet some unexpected need. This calamity is going to hit such people really hard.
The people whose lives will be most devastated are of course those who lose loved ones to the virus. Then there will be those who lose their jobs because they could not do them from home and were not considered essential. As a result, we know that the future is going to be very stressful for those who lose income and health insurance, and that might well lead to an inability to pay rent, buy food, and a rise in bankruptcies. Given the skyrocketing unemployment numbers, it is going to be a long time before many of them find new work because they will be competing against a large number of people in the same boat and this will depress wages. Then there will be those who will face large medical bills they cannot afford to pay because of the insane for-profit health care system that we have in the US. The relief measures passed by the Congress will ameliorate some of these problems but not all and only in the short term.
There may be entire industries that are so badly affected by this pandemic that some businesses in those sectors will disappear or get bought up by others, leading to more monopolistic practices. I am thinking of the cruise, airline, hotel, and hospitality industries, among others, who have been badly hit by people not venturing out. The cruise industry is the most likely to suffer because, unlike the others, it serves only an entertainment purpose. I have never been a fan of cruises myself, unable to see the appeal of getting on a ship or plane without the intention of it taking me somewhere I want to go but I know people who love doing so. A few weeks before this lockdown, I met a couple who told me that they were about to depart on a long cruise around the world. I do not know what happened to them, if they are some of the many people on cruise ships trying to get permission to dock somewhere and disembark the passengers. I can see cruises losing their appeal with many.
While larger businesses might survive, this will not be the case for many smaller businesses that we patronize that might go permanently out of business because of their lack of financial reserves. I am thinking of places like my barbershop, which is run by just one person, or the small Asian grocery store that is run by three sisters and where I get all the spices and ingredients for Sri Lankan cooking. These places may have little or no income during this time but they still have to pay rent for their premises and utilities. If their landlords agree to a moratorium on rent, that would help these small businesses but it shifts the problem one level up. The landlords still have to pay property taxes and their mortgages while not having any income. If the local governments agree to a moratorium on paying property taxes, then those bodies will not have money to pay for municipal services. The banks do not have a good reputation for treating their customers humanely and so the properties may be seized for non-payment of mortgages.
This is a chain reaction that goes all the way up to the state government level and we are likely to have bankruptcies at all levels. The only entity that does not have to balance its books is the federal government that can pump as much money into the system as necessary and they may be required to bail out state and local governments as well as individuals and businesses. That might trigger an inflationary spiral but that problem is down the road. But the ‘invisible hand of the market’ has been shown to be definitely not up to the task.
So expect that when the pandemic finally dies down, life is like to be very different from what it is now, with much, much greater levels of unemployment, poverty, and suffering, and a lot of familiar retail institutions shut down. If the situation becomes very bad, it may result in a radical restructuring of society that results in the elimination, or at least reduction, of the vast income and inequality gaps that we have allowed to be created. Or it may result in an even more extreme and cruel form of capitalism that leads to even greater inequality, with the wealthy getting even wealthier and retreating even further into their enclaves, removed from any danger of encountering the displaced.
The picture I am painting is very bleak. I hope it does not come true.