Sharp Blue: In defence of capitalism

In a recent post on her Livejournal, Ashley said:

I’m trying to figure out… are there any… traits and characteristics inherent to capitalism that are both unique and redeeming.

The real question should be “are there any traits or characteristics inherent to systems other than capitalism that are both unique and redeeming?” The answer to that is “no”.

It’s rather easy from our vantage point in what is more or less a capitalist utopia (at least from the point of view of people living in almost any society in human history) to overlook the fact that almost every characteristic of that society that makes it an acceptable place to live is the product of capitalism. Capitalism is not a light frosting on top of our society’s structure, but its deep infrastructure, its bones and sinews. We take it for granted that people should have equal rights before the law, that they should have voices representing them in government, that they should not be divided into classes with arbitrary hereditary privileges, that they should be able to choose their own paths in life, that they should have relatively free access to knowledge, that innovation should be encouraged, that alternative ways of life should be tolerated and so forth. But every one of those features was a product of first commercial and then industrial capitalism, and few or none of them have been features of societies that are not capitalist. And this isn’t even to mention the more obvious benefit of capitalism: the almost bewilderingly vast range, quality and cheapness of its material products.

Plenty of other methods of organising societies have been tried over the five thousand years of recorded history - theocratic temple states, military kingdoms, empires of various kinds, aristocratic oligarchies, feudal realms, mercantilism, absolutist monarchies, centrally planned economies and so forth, in varying combinations - and none have even come close to providing the benefits provided by capitalism. Indeed, the degree to which historical polities have been reasonable places to live is very closely correlated with the degree to which they have been open to trade and enterprise. This was true of antiquity, and it is emphatically true of the modern age: for many centuries there has been a gradient of quality of life across Europe defined by the degree to which society has been friendly to trade and industry, running downwards from the high peaks of Britain and the Netherlands to the most miserable and squalid regions of eastern Europe in which serfdom has been the dominant way of life. Furthermore, these advances in liberty have not been the causes but rather the effects of capitalism, and have been most strongly felt in those regions in which the groups enriched by trade most rapidly gained a voice in government.

The two serious challenges to the capitalist model[1] in the 20th century - the corporatist/fascist regimes that attempted to structure an economy around large industrial monopolies whose outputs served the interests of the state rather than the people, and the communist planned economies - were both dismal failures. In each, the key idea of capitalism, which is that the relative productions of different kinds of goods should be decided by the decentralised method of allowing multiple companies to compete in free markets, was partly or entirely discarded in favour of some form of centralised planning. That this implies that a small elite of planners is granted enormous power over other people’s lives[2] would have been bad enough to those of us who care about freedom even if the regimes that resulted hadn’t turned out to be more than usually horrific. Furthermore, the longest running experiment, the Soviet Union, only stumbled on for so long showing some semblance of economic progress by using espionage to steal technologies that had been developed in the capitalist world[3]. Without the ability to parasitise capitalism, communism would have been an even more dismal failure. I suppose that with the invention of superhumanly intelligent machines it might be possible for economic planning to be a more effective, but I don’t foresee any other realistic challenger to the central position of free markets in our societies.

What characteristics of other systems do you consider desirable?

---

[1] The social-democratic states of Europe are not a challenge to the capitalist model as their socialist characteristics are entirely dependent upon the continued functioning of their capitalist economies. They more or less allow the market to control the means and targets of production, but skim off and redistribute some of the surplus so generated. In this they’re a little like the temple-states of ancient Mesopotamia or Egypt which taxed surplus production and trade and then redistributed the proceeeds to the disadvantaged, but with the advantage of the immense amount of material progress provided by the capitalist economy.

[2] Even with the most enlightened planners in the first instance, this is a very serious problem. The apparatus of economic planning is a set of levers of power of quite awesome scope. History has shown that even if every such lever is created for good it will be used by ruthless or ambitious people for evil, and often evil on a mindboggling scale. As the technologies of control become more effective, this risk becomes ever greater. Perhaps capitalism leads to the United States, but primitive technologies of social control lead to the Soviet Union, Year Zero and North Korea, and advanced ones to who knows what nightmare. I much prefer the idea of the levers of power being widely scattered so that it’s unlikely that one person or group will gain control of more than a few of them.

[3] Although I must admit that dragging the Russia of the turn of the 20th century into any semblance of an industrialised society was a massively impressive achievement if one can overlook - as I cannot - the immense human cost of that forced progress.