The seductions of capitalism

Capitalism: a system containing “…systemically satanic features” (Karl Polanyi), based on private property which, in the words of the Khmer Rouge is: “the source of egoist feelings and consequently social injustices.” Furthermore, Jonathan Portes tells us: “In a capitalist economy, things that do not have a price are not valued.”

Not looking too good is it? And if that weren’t enough, “Capitalists take the greatest pleasure in seducing each other’s wives.” Or so says the Communist Manifesto.

However, some see capitalism as inextricably linked with freedom. For von Mises, capitalism provided liberty to the powerless: “those who in all preceding ages formed the herds of slaves and serfs.” Indeed, according to the World Bank, because of capitalism “…in 2015, for the first time in human history, less than ten per cent of the global population were living in conditions of extreme poverty.” And what about this one: “[Capitalism] has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals; it has conducted expeditions that put into the shade all former exoduses of nations and crusades.” Who said that? One Karl Heinrich Marx.

In reality, there are only two questions that matter here: first, can capitalism be improved? Secondly, if capitalism were overthrown, what happens next; is there a viable alternative?

Hang on, don’t we need some idea of what we’re talking about… What is capitalism? Marx’s definition is simple: a society is capitalist if its means of production are privately owned. Unfortunately, Marx’s analysis was binary: he didn’t consider the possibility of some of the means of production being in private hands, with the rest in the hands of the state. In the modern world, we have to ask: just how much of the economy can be owned by the state before it ceases to be capitalist? There isn’t much agreement about that. In my view, an economy ceases to be capitalist when prices no longer reflect demand and supply. (There isn’t room for me to explain that here, but I do so in the longer version on my LinkedIn profile.)

Marx gives no description of society after capitalism; there’s no blueprint, no guidance at all

So, can capitalism be improved? Despite claims to the contrary, the number of people who think it can’t, who believe the state is always and everywhere a pernicious phenomenon, is vanishingly small. The debate isn’t around “should” we improve capitalism, it’s about the best way… practically or ethically… to do so. The principal points of contention are the degree and type of state intervention. Of course, the position you take on that will be parasitic on your confidence in our understanding of the economy, and in the competence of the executive. Do we know enough? And, if we do, can we rely on the executive not to screw things up?

What about the second option: overthrowing capitalism altogether. Would we find ourselves in blissful nirvana or in authoritarian hell?
For Marx and the legions influenced by him, the end of capitalism would see the dawn of a new golden age. The evidence suggests otherwise. However, is there a basis for such optimism?

Well, while the non-Marxist sees human society as a reflection of the individual, of a fixed “human nature”, for the Marxist, it’s the other way round. For them, “human nature” is mutable, a manifestation of society. For Marx, everything about a society – its culture, the way people treat one other, even what counts as sound reasoning, is determined by the means of production.

Isn’t that a bit of a strange idea? How could the means of production be responsible for all that? Marx lived and wrote in the shadow of the Industrial Revolution, a time of extraordinary change. Before that revolution, most people lived a rural existence. But the ancient agrarian customs, social structures, and heuristics of life on the land were swept aside by the new industrial society. Agricultural work had variety built into it, it changed with each passing month. Everyone understood their part in the process. People lived in small, self-contained communities where everybody knew everybody else.

The new urban society brought cramped and noisy living conditions, the factory’s rigid and unvarying working practices, industrial dirt and smoke-filled streets. You were just another anonymous cog in a wheel too large to comprehend. The means of production had changed, and so too had society. The brutality, Marx believed, was the responsibility of the capitalist class, the owners of the means of production.

From this Marx inferred that if the means of production were owned communally, all the unpleasantness would simply wither away. It’s a shame Marx gives no description of society after capitalism; there’s no blueprint, no guidance at all. All he tells us is that after we abolish private ownership, everything’s going to be great.

Perhaps that’s a rather flimsy basis on which to gamble the whole of society? How can we be confident things wouldn’t be worse after capitalism? What if the post-capitalists turned out to take the greatest pleasure in seducing each other’s husbands?

Peter Lawlor was the Chief Economist at the German Stock Exchange and continues to advise senior politicians and Wall St institutions. These are strictly his own views