Why economists must think in terms of the cycle of civilization

I've been hearing the phrase "late capitalism" for so long that I'm forced to conclude that the very concept of late capitalism is nothing but wishful thinking.

- Lorraine

I never heard the phrase myself, so I looked it up. In an article that relies not at all on economic thought or analysis (it is more of a social commentary), quoting one of her sources, Annie Lowrey at The Atlantic wrote:

‘Late capitalism’ necessarily says, ‘This is a stage we’re going to come out of at some point ... It hints at a sort of optimism amongst a post-Bernie left, the young left online.

I agree that "late" capitalism necessarily implies we are approaching the end of capitalism. Lorraine seems to see that ending as a source of optimism. I don't, because I interpret economic society in the context of a cycle of civilization. After capitalism comes the decline and fall. There is no cause for optimism.

Late capitalism is by itself evidence of the decline.

Lowrey writes:

“Late capitalism,” in its current usage, is a catchall phrase for the indignities and absurdities of our contemporary economy...

In its current usage, in other words, it is just another way to complain about today's world. (No economic thought or analysis, as I said.) But then Lowrey summarizes the history of the term. Below, I use almost exact quotes from the article, modified to suit the bullet-point format:

• A German economist named Werner Sombart seems to have been the first to use the term, around the turn of the 20th century
• A Marxist theorist and activist named Ernest Mandel popularized it a half-century later
• For Mandel, “late capitalism” denoted the economic period that started with the end of World War II and ended in the early 1970s, a time that saw the rise of multinational corporations, mass communication, and international finance. 
• It was Duke University’s Fredric Jameson who introduced the phrase to a broader English-speaking audience of academics and theorists [in this 1984 paper]
  

Since then, it has become "a catchall phrase" people use when complaining about the economy. 

That's enough Annie Lowrey for me.

That isn't the only disappointing link Google turned up. Under "Late Stage Capitalism - Reddit" we read that r/LateStageCapitalism is "A One-Stop-Shop for Evidence of our Social, Moral and Ideological Rot." That is, a place for social, moral and ideological complaints, not economic thought.

Wikipedia offers a better (less giddy than Lowrey's) summary of Late capitalism. This is excellent:

The term "late capitalism" was first used by Werner Sombart in his magnum opus Der Moderne Kapitalismus, which was published from 1902 through 1927, and subsequent writings; Sombart divided capitalism into different stages: (1) proto-capitalist society from the early middle ages up to 1500 AD, (2) early capitalism in 1500–1800, (3) the heyday of capitalism (Hochkapitalismus) from 1800 to the first World War, and (4) late capitalism since then.

Excellent, because I've been working toward exactly that sort of analysis of civilization's cycles. Wikipedia's phrase "the early middle ages" is a reference to what was formerly (and innocently enough) called "the Dark Ages". It is the "interregnum" between civilizations. Sombart's analysis, like mine, starts in the dark age and describes the whole cycle of civilization as an economic cycle.

Sombart's "early capitalism" is generally called "mercantilism" in what I've read. His "heyday of capitalism" is a period of around 114 years that corresponds to Keynes's "greatest age of the inducement to investment". Keynes described it as "a period of almost one hundred and fifty years", a time when  interest rates were low enough to allow employment to be "not intolerably low". 

Sombart apparently held to a higher standard for the acceptable level of employment, as he includes fewer years than Keynes does. But Keynes and Sombart are describing the same phase of the cycle of civilization.

Elsewhere in the Wikipedia article:

In his work Late Capitalism, Mandel distinguished three periods in the development of the capitalist mode of production. 

• Freely competitive capitalist production, roughly from 1700 to 1870, through the growth of industrial capital in domestic markets
• The phase of monopoly capitalism, roughly from 1870 to 1940, is characterized by the imperialist competition for international markets, and the exploitation of colonial territories.
• The epoch of late capitalism emerging out of the Second World War, which has as its dominant features the multinational corporation, globalized markets and labor, mass consumption, and the space of liquid multinational flows of capital.

Now we're getting somewhere!

Note that Sombart's "heyday" begins about 70 years before the end of Mandel's "freely competitive" period of capitalist production. That puts the change from "freely competitive" to "monopoly capitalism" somewhere near the middle of the heyday years. This makes it easy to imagine the heyday stage in two phases: rise-to-peak during the "freely competitive" period, and decline-from-peak in the "monopoly capitalism" period. The puzzle pieces fit together perfectly. The puzzle begins to look like a cycle.

In my response to Lorraine I wrote:

If, as I think, the cycle of civilization is an economic cycle (like a massive business cycle), then "early" capitalism is the "rise to the peak" and "late" capitalism is the "decline from the peak" which leads to the end of civilization and a "dark age".

Now I have Sombart and Mandel to back me up. And Keynes.

 

All good economists learn by observing the economy of their time. And the economy changes. For these reasons, older economic thought is always being replaced by more current thought. But economic history is too valuable to be forgotten.

For Sombart (1863-1941) late capitalism started with the first World War. For Mandel (1923-1995) it started with the second World War. If we forget Sombart's view and fully embrace Mandel's, we may come to believe there was nothing wrong with the economy before the 1940s. 

People might learn from Sombart that everything was fine before the first world war. People might learn from Mandel that everything was fine before the second world war. In this way we as a society would come to misunderstand our economic troubles, thinking our troubles have no roots in the past and no prior cause. Our economy would become the mess that it has become.

If things were not "fine" before the second world war, but we think they were, we are sure to misunderstand the problems of the post-WWII period. If we overlook just the changes, economic changes of prior times, we are sure to misunderstand the economic problems of our time. The cycle of civilization provides a context to help us understand our economy.