By Robert Skidelsky
LONDON – In 1995, I published a book called The World After Communism. Today, I wonder whether there will be a world after capitalism.
That question is not prompted by the worst economic slump since the 1930’s. Capitalism has always had crises, and will go on having them. Rather, it comes from the feeling that Western civilization is increasingly unsatisfying, saddled with a system of incentives that are essential for accumulating wealth, but that undermine our capacity to enjoy it. Capitalism may be close to exhausting its potential to create a better life – at least in the world’s rich countries.
By “better,” I mean better ethically, not materially. Material gains may continue, though evidence shows that they no longer make people happier. My discontent is with the quality of a civilization in which the production and consumption of unnecessary goods has become most people’s main occupation.
This is not to denigrate capitalism. It was, and is, a superb system for overcoming scarcity. By organising production efficiently, and directing it to the pursuit of welfare rather than power, it has lifted a large part of the world out of poverty.
Yet what happens to such a system when scarcity has been turned to plenty? Does it just go on producing more of the same, stimulating jaded appetites with new gadgets, thrills, and excitements? How much longer can this continue? Do we spend the next century wallowing in triviality?
For most of the last century, the alternative to capitalism was socialism. But socialism, in its classical form, failed – as it had to. Public production is inferior to private production for any number of reasons, not least because it destroys choice and variety. And, since the collapse of communism, there has been no coherent alternative to capitalism. Beyond capitalism, it seems, stretches a vista of…capitalism.
There have always been huge moral questions about capitalism, which could be put to one side because capitalism was so successful at generating wealth. Now, when we already have all the wealth we need, we are right to wonder whether the costs of capitalism are worth incurring.
Adam Smith, for example, recognized that the division of labor would make people dumber by robbing them of non-specialized skills. Yet he thought that this was a price – possibly compensated by education – worth paying, since the widening of the market increased the growth of wealth. This made him a fervent free trader.
Today’s apostles of free trade argue the case in much the same way as Adam Smith, ignoring the fact that wealth has expanded enormously since Smith’s day. They typically admit that free trade costs jobs, but claim that re-training programs will fit workers into new, “higher value” jobs. This amounts to saying that even though rich countries (or regions) no longer need the benefits of free trade, they must continue to suffer its costs.
Defenders of the current system reply: we leave such choices to individuals to make for themselves. If people want to step off the conveyor belt, they are free to do so. And increasing numbers do, in fact, “drop out.” Democracy, too, means the freedom to vote capitalism out of office.
This answer is powerful but naïve. People do not form their preferences in isolation. Their choices are framed by their societies’ dominant culture. Is it really supposed that constant pressure to consume has no effect on preferences? We ban pornography and restrict violence on TV, believing that they affect people negatively, yet we should believe that unrestricted advertising of consumer goods affects only the distribution of demand, but not the total?
Capitalism’s defenders sometimes argue that the spirit of acquisitiveness is so deeply ingrained in human nature that nothing can dislodge it. But human nature is a bundle of conflicting passions and possibilities. It has always been the function of culture (including religion) to encourage some and limit the expression of others.
Indeed, the “spirit of capitalism” entered human affairs rather late in history. Before then, markets for buying and selling were hedged with legal and moral restrictions. A person who devoted his life to making money was not regarded as a good role model. Greed, avarice, and envy were among the deadly sins. Usury (making money from money) was an offense against God.
It was only in the eighteenth century that greed became morally respectable. It was now considered healthily Promethean to turn wealth into money and put it to work to make more money, because by doing this one was benefiting humanity.
This inspired the American way of life, where money always talks. The end of capitalism means simply the end of the urge to listen to it. People would start to enjoy what they have, instead of always wanting more. One can imagine a society of private wealth holders, whose main objective is to lead good lives, not to turn their wealth into “capital.”
Financial services would shrink, because the rich would not always want to become richer. As more and more people find themselves with enough, one might expect the spirit of gain to lose its social approbation. Capitalism would have done its work, and the profit motive would resume its place in the rogues’ gallery.
The dishonoring of greed is likely only in those countries whose citizens already have more than they need. And even there, many people still have less than they need. The evidence suggests that economies would be more stable and citizens happier if wealth and income were more evenly distributed. The economic justification for large income inequalities – the need to stimulate people to be more productive – collapses when growth ceases to be so important.
Perhaps socialism was not an alternative to capitalism, but its heir. It will inherit the earth not by dispossessing the rich of their property, but by providing motives and incentives for behavior that are unconnected with the further accumulation of wealth.
Robert Skidelsky, a member of the British House of Lords, is Professor Emeritus of Political Economy at Warwick University, author of a prize-winning biography of the economist John Maynard Keynes, and a board member of the Moscow School of Political Studies.
LONDON – In 1995, I published a book called The World After Communism. Today, I wonder whether there will be a world after capitalism.
That question is not prompted by the worst economic slump since the 1930’s. Capitalism has always had crises, and will go on having them. Rather, it comes from the feeling that Western civilization is increasingly unsatisfying, saddled with a system of incentives that are essential for accumulating wealth, but that undermine our capacity to enjoy it. Capitalism may be close to exhausting its potential to create a better life – at least in the world’s rich countries.
By “better,” I mean better ethically, not materially. Material gains may continue, though evidence shows that they no longer make people happier. My discontent is with the quality of a civilization in which the production and consumption of unnecessary goods has become most people’s main occupation.
This is not to denigrate capitalism. It was, and is, a superb system for overcoming scarcity. By organising production efficiently, and directing it to the pursuit of welfare rather than power, it has lifted a large part of the world out of poverty.
Yet what happens to such a system when scarcity has been turned to plenty? Does it just go on producing more of the same, stimulating jaded appetites with new gadgets, thrills, and excitements? How much longer can this continue? Do we spend the next century wallowing in triviality?
For most of the last century, the alternative to capitalism was socialism. But socialism, in its classical form, failed – as it had to. Public production is inferior to private production for any number of reasons, not least because it destroys choice and variety. And, since the collapse of communism, there has been no coherent alternative to capitalism. Beyond capitalism, it seems, stretches a vista of…capitalism.
There have always been huge moral questions about capitalism, which could be put to one side because capitalism was so successful at generating wealth. Now, when we already have all the wealth we need, we are right to wonder whether the costs of capitalism are worth incurring.
Adam Smith, for example, recognized that the division of labor would make people dumber by robbing them of non-specialized skills. Yet he thought that this was a price – possibly compensated by education – worth paying, since the widening of the market increased the growth of wealth. This made him a fervent free trader.
Today’s apostles of free trade argue the case in much the same way as Adam Smith, ignoring the fact that wealth has expanded enormously since Smith’s day. They typically admit that free trade costs jobs, but claim that re-training programs will fit workers into new, “higher value” jobs. This amounts to saying that even though rich countries (or regions) no longer need the benefits of free trade, they must continue to suffer its costs.
Defenders of the current system reply: we leave such choices to individuals to make for themselves. If people want to step off the conveyor belt, they are free to do so. And increasing numbers do, in fact, “drop out.” Democracy, too, means the freedom to vote capitalism out of office.
This answer is powerful but naïve. People do not form their preferences in isolation. Their choices are framed by their societies’ dominant culture. Is it really supposed that constant pressure to consume has no effect on preferences? We ban pornography and restrict violence on TV, believing that they affect people negatively, yet we should believe that unrestricted advertising of consumer goods affects only the distribution of demand, but not the total?
Capitalism’s defenders sometimes argue that the spirit of acquisitiveness is so deeply ingrained in human nature that nothing can dislodge it. But human nature is a bundle of conflicting passions and possibilities. It has always been the function of culture (including religion) to encourage some and limit the expression of others.
Indeed, the “spirit of capitalism” entered human affairs rather late in history. Before then, markets for buying and selling were hedged with legal and moral restrictions. A person who devoted his life to making money was not regarded as a good role model. Greed, avarice, and envy were among the deadly sins. Usury (making money from money) was an offense against God.
It was only in the eighteenth century that greed became morally respectable. It was now considered healthily Promethean to turn wealth into money and put it to work to make more money, because by doing this one was benefiting humanity.
This inspired the American way of life, where money always talks. The end of capitalism means simply the end of the urge to listen to it. People would start to enjoy what they have, instead of always wanting more. One can imagine a society of private wealth holders, whose main objective is to lead good lives, not to turn their wealth into “capital.”
Financial services would shrink, because the rich would not always want to become richer. As more and more people find themselves with enough, one might expect the spirit of gain to lose its social approbation. Capitalism would have done its work, and the profit motive would resume its place in the rogues’ gallery.
The dishonoring of greed is likely only in those countries whose citizens already have more than they need. And even there, many people still have less than they need. The evidence suggests that economies would be more stable and citizens happier if wealth and income were more evenly distributed. The economic justification for large income inequalities – the need to stimulate people to be more productive – collapses when growth ceases to be so important.
Perhaps socialism was not an alternative to capitalism, but its heir. It will inherit the earth not by dispossessing the rich of their property, but by providing motives and incentives for behavior that are unconnected with the further accumulation of wealth.
Robert Skidelsky, a member of the British House of Lords, is Professor Emeritus of Political Economy at Warwick University, author of a prize-winning biography of the economist John Maynard Keynes, and a board member of the Moscow School of Political Studies.
Marion Maneker says:
Robert Skidelsky, the British biographer of Keynes, concern is that capitalism, having done the job of bringing wealth to large numbers of people in the developed countries, was running out of productive goals.
Skidelsky quickly transitions into a moral argument about the uses of wealth. But there’s another, perhaps more important question to explore here. What if capital itself is running out of places to generate returns.
After all, we’re told that one of the prime causes of the worldwide housing bubble was an excess of capital sloshing around the world. In the US, the financialization of the economy is direct product of over-capitalization.
Finally, the latest driver of the economy, the technology business is rapidly de-materializing uses for capital. Facebook, Apple, Google even Goldman Sachs don’t have their capital invested in things. The money that makes up their capital is mostly invested in human beings.
We don’t know where Facebook plans to spend the billions it is raising. There’s talk of moving to a new corporate campus, of keeping talented engineers on staff and surely they need some server space. Groupon doesn’t seem to need the money they’re raising so much as they’re raising money because this is their time.
Maybe these are just anomalies around specific businesses. But it is troubling that these are the success stories of our time and it’s hard to see where the capital is beyond digits on a screen.
genomik Says:
True. Capitalism has been great for the growth phase of humanity, its teen years. Now we are, by some measures, mature. We need to look to another new system. technology is advancing at an exponential pace. It used to be capitalism advanced tech, now tech sort of has its own inertia. We do not need to throw gasoline on the tech fire. Product cycles are so fast its difficult to have lifespans of many products, and that will increasingly be a problem. How many PhDs are on earth now? 100s of millions?
This is why looking at history has its limitations. Capitalism HAS been pretty good. But the *big picture* is changing. As people get richer they get obese, with weight and many other aspects. What do we need more for? The price is increasingly paid by the environment as well, so we have more money, but if the forests and corals are dead, what will we do with it? Buy gold plated toilets?
As a technologist, I think this is why many of us got into tech. We watched Star trek and saw the replicators that made food etc. There was no money in Star Trek. Just adventure. The future was post capitalism. We are not far away from nanotech, where we can technologically manufacture gold and diamonds from other elements for example – 20 years? Automation threatens to increase unemployment while simultaneously reducing the need to work! These and many other transformative technologies will invert Capitalism. By the way, capitalism itself is hastening the coming of the techs that will undermine it!
While I think Socialism is the heir as the writer says, it may be a new form. When I tell most people socialism is the heir they get emotionally invested and see red. Perhaps a new word could meke it more palatable. Technologism? Stabalism? Social Technologism? SoTek?
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