Capitalism: the worst economic system, apart from all the rest?
The title is taken from Winston Churchill’s famous remark that “Democracy is the worst form of government, except for all those other forms that have been tried from time to time”. For now, I’ll leave aside the issue of whether or not we live under a system one could meaningfully describe as democratic and focus on the question of whether one could make a similar remark about capitalism.
Let’s first be fair to capitalism and ask, do we live under a system one could meaningfully describe as “capitalist”? Plenty of capitalist ideologues would say not, arguing that we do not enjoy “pure capitalism” but some sort of “crony capitalism” perversion of this, due to the bogey of “government interference” in “the market” (“the market” being implicitly equated with capitalism, when as I would have it, the two are quite separate – more later :-)). So let me begin by defining capitalism, what the word means to me at least.
To me, “capitalism” denotes two things. First, it is a particular choice about the forms of private property that should apply to the means of producing goods or providing services. Capitalism decides to make such means the “private property” of those able to invest sufficient capital to assume the legal ownership of them. This investment capital is supplied by shareholders or “lent” (i.e. created) by banks. Second, it is a particular choice about how to incentivise and reward this production, how to divide profits between those involved. Where profits are made, these are divided between the shareholders in proportion to the shares they own. Meanwhile, production itself is undertaken by a workforce. Their incentive to work is the payment of a fixed wage, taken from the pool of investment capital.
All the above are quite specific arrangements. One can imagine changing many things about them, such as to whom “private property” is attributed and why, or the particular incentive structures in place. Consider for example if the means of producing goods or rendering services were not owned by investors and managers, but instead by the workforce themselves. The workforce could then own together what was produced and try to sell it on the open market for a profit. I regard capitalism as a quite separate notion from markets – the former is a choice about how to produce things, the latter a choice about how to distribute them – “market socialism” is not an oxymoron. These profits of production could then be shared between the producers directly involved in their generation, rather than between shareholders who are not directly involved but merely invest capital.
I fact, the whole need for “investment” might disappear entirely, if private property laws were adapted. R. H. Tawney makes this point very clearly in his book The Acquisitive Society, arguing that private property rights – the permission to make use of productive industry – should be granted to potential producers on the basis of the social function their use of it could provide, not as at present to investors on the grounds that they provide the capital to invest. He denotes a society operating on this maxim a “functional society”, which he contrasts with our actual “acquisitive society”, in which the aim of “private property”, as applied to industry, is the breeding of capital and not the provision of social functions, which is only realised incidentally, if at all, under the capitalistic ownership of industry .
Now one may or may not think the above suggestions fairer or better than the current arrangements. That is beside the point. The point is, it is easy to imagine changing what I defined “capitalism” in various ways. If you dislike my suggested ways, think of your own! Many alternative arrangements are possible. Would it still then be “capitalism”? This is a question of semantics and not the relevant question of whether a social system better than what is currently identified as “capitalism” can be tried in the future or has been tried successfully in the past.
So, are alternatives to conventional capitalism possible? Most certainly – as we have seen, one simply needs to amend any of the many particulars pertaining to how production is gone about and rewarded. Have they been practiced successfully? Yes, at many points in history and in many places in the world today. One example is the Scott Bader Commonwealth, which E. F. Schumacher wrote about in his book, Small is Beautiful – read the relevant passage here. Another example is the successful workers movement in Argentina to collectivise a Forja auto plant, closed after the fall of the Menem government, as documented in the film The Take. Anarcho-Syndicalism successfully put into practice perhaps? Many forms of co-operative institutions all over the world today follow similar alternative ownership and profit sharing practices.
In conclusion then, I would argue that to claim the capitalist system, as I defined it, is both the best way of organizing production we have managed to think of, and that better alternatives have never been practiced successfully, shows both a lack of imagination and a lack of acquaintance with the relevant facts. To claim that it is undesirable for such practices to become more widespread, when they are in fact desired by many workers, reveals a suspicious aversion to democracy.