Fernando Alcoforado*
This article aims to present the signs of the decay of the world capitalist system that is inevitably heading towards its end in the middle of the 21st century when the global profit rate and the growth rate of the Gross World Product will reach zero value [1]. Furthermore, capitalism will evolve with the characteristics of entropy [4] as it exhibits the universal tendency to evolve into increasing disorder and self-destruction until its end in the mid-21st century. This scenario will lead to the end of the capital accumulation process, confirming the tendency that capitalism will not last forever as a mode of production, as many people think, because it will have the same end as other modes of production that have disappeared, such as the slavery in the fifth century and feudalism in the fourteenth century [3]. The decay of the world capitalist system is materialized, therefore, in the fact that the global profit rate and the growth rate of the Gross World Product will reach zero in the middle of the 21st century, capitalism will evolve presenting entropy with increasing disorder and self-destruction and will arrive at the end, as happened with the slavery and feudalism modes of production.
The world capitalist system will come to an end in the middle of the 21st century because there is a downward trend in the world profit rate from 1869 to 2007 (Figure 1), in the profit rate of large US corporations from 1947 to 2007 (Figure 2) and in the growth rate of the World Gross Product from 1961 to 2007 (Figure 3). To determine when these rates will reach zero in the future, maintaining the downward trend, calculations were performed using the least squares method of Statistics.
Figure 1- Worldwide profit rate
Source: MAITO, Esteban Ezequiel. The tendency of the rate of profit to fall since the nineteenth century and a world rate of profit. In: Roberts, M. & Carchedi, G. World in Crisis: a global analysis of Marx’s law of profitability. Chicago: Haymarket, 2018.
Figure 2- Profit rate at the historical cost of fixed capital in US corporations
Source: KLIMAN, A. The failure of capitalist production: underlying causes of the great recession. London: Pluto, 2012.
Figure 3- Real growth rates of World Gross Product and Financial Products (derivatives)
Source: BEINSTEIN, Jorge. Rostos da crise: Reflexões sobre o colapso da civilização burguesa. Disponível no website <http://resistir.info/crise/beinstein_04nov08_p.html>, 2008.
Figure 1 shows the evolution of the profit rate of the world capitalist system from 1869 to 2007, pointing to its decline in this period [6]. If the evolution of the profit rate of the world capitalist system in the period 1869-1947 is considered and the downward trend of this profit rate in the most recent period, 1947-2007 is maintained, the profit rate of the world capitalist system would tend towards the value equal to zero in 2037. Figure 2 shows the evolution of the profit rate at the historical cost of fixed capital of US corporations from 1947 to 2007, pointing to its decline in this period [5]. If the downward trend of this profit rate is maintained in the coming years, the profit rate of US corporations will reach zero in 2043. Figure 3 shows the evolution of the Gross World Product from 1961 to 2007 showing its decline in this period [2]. If the downward trend in the growth rate of the Gross World Product is maintained in the coming years, this rate will reach zero in 2053.
It is concluded, from the above, that the world capitalist system would be rendered unfeasible in the mid-21st century (2037, 2043 or 2053) when the process of capital accumulation will cease with the global profit and growth rates of the world economy reaching zero value. The decreasing trend of profit rates in the world capitalist system shows the historical, transitory character of the capitalist mode of production and the conflict that is established with the possibilities of continuing its development. Thus, the foundations of Marx’s theory presented in his work The Capital are being confirmed [7, 8 and 9]. Karl Marx predicted that the rate of profit will tend to fall in the long run, decade after decade. Not only will there be ups and downs in each boom and crisis cycle, but there will also be a long-term downward trend, making each boom shorter and each crash deeper.
In addition to the signs of decay represented by the fall in the world profit rate, the profit rate of large corporations in the United States, the growth rate of the World Gross Product that will reach zero in the middle of the 21st century, another important sign of decay in the Capitalism is the gigantic global debt, which reached US$275 trillion in 2020 in government, corporate and domestic debt, almost three times the Gross World Product, which constitutes a bomb ready to explode [11] (Figure 4).
Figure 4- Global debt from 2013 to 2020
Figure 5 shows the evolution of the world debt of households (household), non-financial companies (non-financial corporate), government (government) and the financial sector (financial) and total in 2003, 2008, 2013 and 2018.
Figure 5- World debt from 2003 to 2018
Source: ALVES, José Eustáquio Diniz. A dívida global atinge US$ 247 trilhões: uma bomba prestes à explodir? Disponível no website <https://jornalggn.com.br/crise/a-divida-global-atinge-us-247-trilhoes-uma-bomba-prestes-a-explodir/>, 06/08/2018.
The Institute of International Finance (IIF) claims that global debt was less than US$100 trillion in 2003, reached US$177.7 trillion in 2008, US$209.4 trillion in 2013 and US$247.2 trillion in 2018. World debt has risen by nearly US$150 trillion in 15 years. About US$10 trillion each year. Debt levels of households, non-financial corporate sectors and government reached US$186.5 trillion in the first quarter of 2018. Financial sector debt rose to a record US$60.6 trillion. World economic growth is being sustained by credit and indebtedness. Emerging market debt rose to a record US$58.5 trillion in the first quarter of 2018 – more than 84% since the start of the global crisis in 2008. Over the past 5 years, government debt has risen most sharply in Brazil, Saudi Arabia, Nigeria and Argentina, according to the IIF [12].
After the 2008 global crisis, the general expectation was that debts would be reduced. That’s not what happened. Several countries have governments, businesses and households with debts that far exceed GDP. Japan, for example, has debts that are 4 times the size of the economy itself. The largest debts between countries are, in order, as follows: Japan (400% of GDP), Ireland (390% of GDP), Singapore (382% of GDP), Portugal (358% of GDP), Belgium (327% of GDP), Netherlands (325% of GDP), Spain (313% of GDP), Denmark (302% of GDP), Sweden (290% of GDP), France (280% of GDP), Italy (259% of GDP ), United Kingdom (252% of GDP), Norway (244% of GDP), Finland (238% of GDP), United States (233% of GDP) and Brazil (128% of GDP). The problem is especially severe in countries like Japan whose total debt is 4 times the size of the economy itself [13]. These numbers show that all listed countries have debts greater than the GDP (Gross Domestic Product) characterizing the existence of excessive indebtedness.
Figure 6 shows countries’ share of global debt. The United States, China and Japan are the biggest debtors on the planet, accounting for 45.93% of the total debt. This means that if there is a default in the payment of debt in these three countries, the world economy could face situations similar to those that occurred in 1929 with the great depression or in 2008 and with the great recession that still persists.
Figure 6- Share of countries in global debt (%)
Source: https://coinzodiac.com/get-rich-in-market-crash/how-much-world-debt/
One of the indebted countries that deserves special analysis because it is the largest economy and the most indebted country on the planet is the United States. The US public debt has been breaking records, especially since 2019 with the outbreak of the new coronavirus pandemic because the country spends and buys beyond its capacity issuing dollars and Treasury bonds [14]. The risk of major catastrophes in the United States, with its excessive indebtedness, has not disappeared, but has spread over time, at the price of increasing them in proportion and explosion when to burst. It should be noted that US public indebtedness is strongly related to military spending. Figure 7 shows the debt escalation of the world’s largest economy, the United States, from 1966 to 2014.
Figure 7- The escalation of US debt from 1966 to 2014 in billions of dollars
Source: DANTAS, Gilson. Por que o neoliberalismo desembocou na grande crise de 2008-09? Disponível no website <https://www.esquerdadiario.com.br/Por-que-o-neoliberalismo-desembocou-na-grande-crise-de-2008-09 >, 10/09/2018.
The global financial system led by the US dollar is beginning to point to the accelerated loss of confidence in the dollar that has dominated the world for almost a century as the indebtedness of the United States evolves. Figure 8 shows that the dollar as an international reserve has been progressively falling.
Figure 8- The dollar as a percentage of international reserves from 2007 to 2019
Source: https://thoth3126.com.br/eventos-estao-em-curso-para-remover-o-dolar-como-moeda-de-reserva-global/
In 2018, the dollar’s share of international reserves dropped to 61.7%, which is the lowest level in the last 20 years, demonstrating the lack of confidence in the dollar. This loss of confidence results from the fact that the current global economic crisis shows that a monetary system like the current one based on paper money issued freely and without ballast by the US government is inherently unstable whose inevitable consequences of this process are artificial economic growth , the euphoria and the bad investments that such growth generates, and, finally, the depressions.
The drop in confidence in the dollar is increasing the price of gold on the world market as shown in Figure 9.
Figure 9- Gold price on the world market
Source: https://xn--cotaodoouro-c8a5c.com/cotacoes/cotacao-ouro-historico/
In addition to an increased demand for gold to replace the dollar as an international reserve, there is a tendency to replace the dollar with world currencies capable of replacing it, such as the Euro, the Chinese Yuan and Special Drawing Rights (currency of the IMF). In addition to the lack of confidence caused by the lack of dollar backing, the decline of the US economy, the abandonment of the dollar as a world reserve currency is also driven by the possibility of the explosion of the US public debt bubble that corresponds to 23 trillion dollars, higher than the country’s GDP, a historic record, which could reach 140% of GDP by 2024.
From the above, it can be said that the capitalist system is a system that operates according to the principle of entropy, which is the measure of disorder or the unpredictability of a system’s performance. Capitalism presents, therefore, universal tendency to evolve into increasing disorder and self-destruction [4]. This situation is demonstrated by the downward trend in the global profit rate, the profit rate of large corporations in the United States and the growth rate of the World Gross Product, which will reach zero in the middle of the 21st century, as well as the excessive indebtedness of the countries of the world especially, the United States, China and Japan. The unpredictability of capitalism results from the fact that it is a system that operates chaotically, without planning and control, by denying, with neoliberalism, the regulation of the world capitalist system. Another sign of capitalism’s decay resides in the fact that all available data point to the fact that the world capitalist system will evolve into growing disorder and self-destruction because planet Earth is already reaching its limits in the use of its natural resources [1]. Today, due to the current consumption pace, the demand for natural resources exceeds the Earth’s replacement capacity by 41%. If the escalation of this demand continues at the current rate, in 2030, with an estimated global population of 10 billion people, it will take two Earths to satisfy it. The predictable depletion of mineral resources, particularly energy, and the threat of catastrophic climate change, major themes on the ecological agenda, fit well into the entropic process
Despite having contributed to the progress of humanity since its emergence in the 14th century, the decay of capitalism manifests itself, for example, with economic chaos at the national and global levels that generate endless economic recessions and depressions, the serious social damage in every country in the world represented by excessive income concentration, growing social inequality and endemic hunger and misery, the environmental degradation of the planet that tends to lead to the depletion of its natural resources, catastrophic climate change and the occurrence of new pandemics lethal to humanity, by the increase in violence within countries with the escalation of crime and the outbreak of civil wars, and also the violence in international relations represented by the two great world wars and by the endless international conflicts across the planet [1]. The decay of the capitalist mode of production is manifested both in the central capitalist countries and in the peripheral and semi-peripheral countries, especially in the latter where misery grows overwhelmingly. All this shows that a new mode of production will have to emerge with the end of capitalism.
Throughout human history, slavery, feudalism, capitalism, in addition to the failed attempt at socialism, have existed as mode of production, after the primitive way of life [3]. The primitive way of life has existed for hundreds of thousands of years since the emergence of human society when human beings worked together, so that the fruits of this labor were owned by all. Slavery was a mode of production that lasted 1000 years, from the 5th century BC to the 5th century, through which a small number of masters exploited a large mass of slaves giving no rights to the slaves who produced the goods. It was a typical mode of production of Antiquity (Greece and ancient Rome). Feudalism lasted 900 years, from the 5th to the 14th century, which was characterized by the relationship between feudal lords and serfs. Serfs were subordinate to masters. In the period of feudalism in the Middle Ages, there were no countries, as we know them today. There were manors, tracts of land over which feudal lords had possession and political power. Feudal lords were not only owners of manors, they were also their rulers. Part of the production was destined for the subsistence of the servants. The other, larger part was owned by feudal lords. Around the 14th century, with the disintegration of feudalism, a new economic, social and political system began to emerge: Capitalism. The essential feature of the new capitalist mode of production is the fact that in it, work is wage-earning and no longer servile as in feudalism. But it was only after the Industrial Revolution, which started in the 18th century in England, that capitalism was boosted. In the same way that slavery and feudalism had a beginning and an end, capitalism that had its beginning in the 14th century in Europe will follow the same trajectory culminating in its end in the mid-21st century with a duration of 700 years when the rate of profit of the world capitalist system and the growth of the world economy will reach zero value.
Everything that has just been described makes it clear that there is no solution to the problems that afflict humanity within the framework of capitalism with the implementation of political, economic, social and environmental reforms. It will be the same as “drying ice”. Faced with the prospect of the end of the world capitalist system in the mid-21st century, humanity needs to build a new society that should be democratic socialism, aiming to create an environment of freedom, equality and fraternity among human beings to achieve their happiness rescuing the ideals of the Enlightenment. To build democratic socialism to replace capitalism, there needs to be a transition with the construction of the Welfare State with a model of society along the lines of that built in Scandinavian countries, which, being a hybrid between what is most positive in the capitalist and socialist systems, would prepare the ground for the building of democratic socialism in the future [10]. The Welfare State consists of a mode of economic, political and social organization in which the State would act as an organizer of the economy and an agent of social promotion. The State would seek to reconcile the interests of “from above” with those “from below” in the social pyramid. The Scandinavian model of political, economic and social development should serve as a reference as a model of society to be pursued by all peoples of the world as a transition to the democratic socialism of the future because the Scandinavian countries are considered the best governed on the planet, those that they have the greatest political, economic and social progress and have the happiest people in the world. The Welfare State and the democratic socialism of the future to be built in the world must be tailored to the specific conditions of each country.
To build a new society on the planet, the existence of a world government and a world parliament is urgently needed to coordinate the actions of national governments to promote the transition from capitalism to democratic socialism. In order to make a world government viable, a World Forum for Peace and the Humanity Progress must be established, at first, with the participation of representatives of governments and civil society organizations from all the countries of the world. In this Forum, objectives and strategies would be debated and established aiming at the constitution of a world government, a world parliament and the construction of a new society that be structured on the principles of the Enlightenment, that is, on freedom, equality and fraternity.
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15. THOTH3126. Eventos estão em curso para remover o dólar como moeda de reserva global. Disponível no website <https://thoth3126.com.br/eventos-estao-em-curso-para-remover-o-dolar-como-moeda-de-reserva-global/>.
* Fernando Alcoforado, 81, awarded the medal of Engineering Merit of the CONFEA / CREA System, member of the Bahia Academy of Education, engineer and doctor in Territorial Planning and Regional Development by the University of Barcelona, university professor and consultant in the areas of strategic planning, business planning, regional planning and planning of energy systems, is author of the books Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC- O Brasil e a Nova (Des)ordem Mundial (Editora Nobel, São Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, São Paulo, 2000), Os condicionantes do desenvolvimento do Estado da Bahia (Tese de doutorado. Universidade de Barcelona,http://www.tesisenred.net/handle/10803/1944, 2003), Globalização e Desenvolvimento (Editora Nobel, São Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX e Objetivos Estratégicos na Era Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of the Economic and Social Development- The Case of the State of Bahia (VDM Verlag Dr. Müller Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe Planetária (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2010), Amazônia Sustentável- Para o progresso do Brasil e combate ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011), Os Fatores Condicionantes do Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012), Energia no Mundo e no Brasil- Energia e Mudança Climática Catastrófica no Século XXI (Editora CRV, Curitiba, 2015), As Grandes Revoluções Científicas, Econômicas e Sociais que Mudaram o Mundo (Editora CRV, Curitiba, 2016), A Invenção de um novo Brasil (Editora CRV, Curitiba, 2017), Esquerda x Direita e a sua convergência (Associação Baiana de Imprensa, Salvador, 2018), Como inventar o futuro para mudar o mundo (Editora CRV, Curitiba, 2019) and A humanidade ameaçada e as estratégias para sua sobrevivência (Editora Dialética, São Paulo, 2021) .
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