When I speak to people who grew up in the 1950s and 60s, it is no surprise to me that they tend to have faith in this system, Capitalism, because they can't quite understand how it has changed. Those of us who grew up in the 80s and 90s tend to have progressively diminishing faith in the beast, as we come to realise that it can never be fully tamed. The beast started to slip its bonds as soon as they were forged. By the 1980s, it had broken free almost completely, thanks to the efforts of politicians like Margaret Thatcher in the UK and Ronald Reagan in the US. Immediately, the beast set about devouring whole communities in the name of productivity and profit. The result was an ever increasing concentration of wealth in the hands of an ever-diminishing global elite. Unemployment soared in the developed world as labour was cast aside like a rusty spanner.
Financial capital now reigns supreme and the most profitable 'industry' is the one that doesn't actually produce anything at all, except debt: banking. How did it come to this? But wait. Surely, Capitalism is not all bad. Maybe we can just fix it again. Hasn't Capitalism given us progress and prosperity for 300 years? Without free markets, global trade and competition, would we have personal computers, cars, air travel, medicines, mobile phones, the internet and televised football? I think the answer is 'yes', apart from the last one perhaps, because scientific and technological progress is driven more by human curiosity and the flow of information than by anything else. In fact, free markets did not create the internet and probably never would.
Nevertheless, I will admit to having a great admiration for the idea of free market economies, by which I mean genuinely free markets - not the markets we have in practice which masquerade as being free whilst in fact being controlled and manipulated by oligarchs (both governments and big business). Free markets are not the same thing as Capitalism. I would say they are opposites. In many ways, a free market is the ultimate expression of the political philosophy of anarchism. A truly free market is a self-organising structure created by a network of equal and free agents. As such, it is potentially a thing of beauty and a useful tool. Free markets do not need hierarchies! Unfortunately, it is the existence of hierarchies which causes free markets to fail so badly within a Capitalist framework. Capitalism is the offspring of a marriage between a quasi-free-market ideology and a perverse socio-monetary system which is the antithesis of liberty. The result is a modern version of feudalism. A slight digression is required to explain this:
In textbooks of free-market economics, we learn that money is supposed to represent 'utility', which is supposed to stand for the needs or wants of an individual human agent. What this means is that when you pay £2 for a cup of coffee, the coffee represents at least £2 worth of pleasure or satisfaction to you personally. To be more precise, it represents no less satisfaction than something you would be prepared to forego for the sake of a payment of £2. Example: you sell a book for £2 and then buy a cup of coffee with the money. Obviously, the coffee is worth more to you than the book, so you have gained from the transaction. Miraculously, everybody gains from every transaction - or else they wouldn't undertake them. It is this equivalence between money and utility which allows economists to claim that free markets maximise overall utility, just as John Stuart Mill recommended:
MONEY ≡ UTILITY
This is the great myth of right-wing libertarianism. If only it were true, the world would indeed be just as Ayn Rand wanted it and greed would probably be good. (Actually, Ayn Rand was a hypocrite and my tongue is firmly in my cheek at this moment). The truth is that money does not equate to utility, as even the dullest economics graduate could see - if he wasn't so blind. People are not allocated a stock of money based on the sum total of their needs and wants. Money is created by banks and governments, or inherited. This means that a starving child in Ethiopia has no power to meet even his or her most basic need for food, because he or she has no access to money. By contrast, a child born into a rich family in America can satisfy every casual whim, even though the utility of a Humvee to a 17-year-old brat from Texas is surely a fraction of the utility of a bag of rice to the Ethiopian child. I can't believe I have to point this out, but apparently I do. In practice, Capitalism is a system where
MONEY ≡ POWER
This is the real equivalence. Markets tend to be dominated and manipulated by a handful of agents with huge power, granted by their possession of huge amounts of money, far beyond what is needed to meet most of their desires. By the same token, power begets money. Worse still, many of the most powerful agents are not even human! This is what I meant when I spoke of a socio-monetary system. Today, the wealthiest (and therefore most powerful) agents in the world are multinational corporations and national governments - not individuals. This is a very serious problem and it contrasts starkly with the situation pertaining 250 years ago, in the days when Adam Smith was formulating the principles of liberalism. To see the problem, just consider this question: what are the needs and desires (i.e. utility) of a corporation? Or a government (especially one which is not very democratic)? I'm not going to expound on this, as I'm sure you'd like to think about it. If you want a primer, try reading or watching The Corporation, by Joel Bakan. Bakan's thesis is that if a corporation were to be viewed as a human being, it would necessarily be considered a psychopath, in consequence of its legal constitution. It follows, therefore, that Capitalism is a feudal system dominated by a psychopathic non-human aristocracy with a subordinate gentry class of wealthy individuals and corrupt politicians. Even the wealthy are victimised by this system.
These are the most fundamental and intractable problems of Capitalism, but they are not the only ones. Even economists recognise a few other problems, and generally sweep them up under the heading of 'externalities'. Externalities are important but they are not fundamental. The conclusion is that Capitalism cannot simply be fixed. For example, when UK Health Secretary, Andrew Lansley talks of opening up the National Health Service to free-market competition, what he has in mind is actually something very similar to the 18th Century Acts of Enclosure, whereby common land (a resource) was taken away from the peasantry and appropriated by the aristocracy and gentry. This has nothing to do with real free markets, because free markets cannot ever exist under Capitalism.
So, Capitalism is rotten. We know that now. It has only been around for 300 years or so, which is the blink of an eye in terms of human history. There is no reason to think it will last any longer than the Roman Empire did. But what can we replace it with? Post-Capitalism, of course. Forgive the glib answer: it's a cipher which invites speculation and experimentation. I don't have a ready-made system, like Marx. All I can say is that Post-Capitalism will have no place for feudalistic, hierarchical, profit-obsessed, psychopathic multinational corporations or highly centralised, bureaucratic, corrupt, undemocratic governments. It will also be a more equal society in every sense. Post-Capitalism will be a creation of the people, by the people, for the people.