It’s an amazing state of affairs when you stop and think about it. Almost everyone in the West enjoys lives which would be envy of any Roman Emperor or Pharoah of ancient history, remarks John Lanchester, in his book about the financial crisis, Whoops! Whether we appreciate it or not, we live in the best societies that have ever existed.
Because of our wealth, we are the most fortunate humans that have ever lived, says Lanchester.
Do you feel lucky, punk?
Anti-austerity journalist Polly Toynbee was a mere seven years ago eulogising current society as an overlooked golden age. There has never been a better time to be alive, she said, despite the mood of pessimism. Supermarkets were “modern miracles of splendour and choice … Unimaginable luxuries and choices are now standard - mobile phones sending pictures everywhere, accessing the universe on the internet and iPods with all the world's music in your ear.”
In previous centuries, most children died before they reached maturity, epidemics and malnutrition were rife, most people did not survive past forty and women bore so many children, they were used up and exhausted by their thirties.
Larry Elliot, economics editor of the Guardian newspaper, recently told the same story in economic terms. “Before new and more efficient production methods for agriculture and industry were developed in the 18th century, per capita incomes in the west had risen at a glacial pace for more than 1,000 years,” he wrote. “Modern industrial capitalism generated surpluses and it was this that differentiated it from the subsistence model.”
Is not, therefore, modern industrial capitalism responsible for our “unimaginable luxuries” and the blessings of wealth? Should we not be thankful?
“The reality of the world resists us”
If you are searching for a reason why a pervasive sense of dissatisfaction has not led to a more widespread alienation from capitalism, I think it’s because of an unconscious fear of killing the troublesome goose (and its incurable troubles were laid bare in Parts 2.1 and 2.2) that lays the golden eggs.
As an example, take foreign holidays. More and more people, and young people in particular, experience them as a matter of course. In the 1970s neoliberal think-tanks in the UK asserted that secretaries flying off on holiday to the Greek islands was a standing refutation of the Left. In the film La Guerre Est Finie Yves Montand, a Spanish Communist, says, “14 million tourists vacation in Spain every year. The reality of the world resists us.”
Here is the appeal of capitalism in all its seductive glory, its ability to achieve technological advancement and satisfy consumer desires. Yes the same ability is inescapably linked to its faculty to eat up resources and destroy the natural environment. Capitalism's failings may bring it down and “us with it” said investment manager Jeremy Grantham last year.
Consumerism was and still is the glue that binds people most tightly to the system. Everyone, says US economist Richard Wolff, from economists, to advertisers, business, the media but also trade unions and left movements bought into this idea. Modern economics was built on the assumption that labour was the burden for which consumption, enabled by wages, was the compensation.
Rising wages became the gold standard for what they could buy but consumerism has been entrenched at the expense of other, possible advancements of human freedom and welfare. Roads, not less traveled, but not traveled at all. Wolff describes consumerism as a deal. Though he is speaking of the US, what he says is true of any western country.
“The deal might have collapsed at any time if US workers rebelled against the organization of production in the US. This could have occurred if rising wages did not suffice to make them ignore the growing inequality of US life, or if they rejected subordination to ever more automated, exhausting work disciplines, or if they refused to deliver ever more wealth to every fewer corporate boards of directors of immense corporations ever further removed from them in power, wealth and access to culture.”
Of course, now, one part of the consumerist deal – rising wages – is falling apart. The golden age seems definitely over. Young people may be able to fly to Barcelona but they are also sinking further into debt to in order to pay for the education to get jobs that don’t exist.
Yes the glue has retained most of it stickiness up to now.
You can’t always get what you want
But I want to argue that capitalism’s ability to deliver utility, to provide satisfaction to consumers – the choice of multi-national food, the EasyJet flight to Prague for the cost of a pub lunch is (setting aside externalities like climate change) more than matched by its capacity to create dis-utility. And both come from the same source.
It’s almost a truism to note, although still worth noting, that capitalism’s ability to satisfy consumer desire is a by-product. “It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest,” said Adam Smith. You are not given the choice to buy a new Smart Phone by the pure, unadulterated desire of Apple to enhance human communication, but by that corporation’s need to make a profit.
But, just as intrinsic to capitalism, although less frequently observed, is that it is an accumulative system. “Every year,” writes David Schweickart, “enormous quantities of commodities are produced that, when sold at anticipated prices, generate enormous profits, a large fraction of which are reinvested back into the economy in anticipation of still greater production and still more profits.”
For capitalism to function smoothly, this money must find somewhere to go. That it can’t find somewhere to go – corporations in the UK are sitting on £750bn – is one reason why it’s not functioning smoothly. But the use and re-use of money is at the heart of capitalism. That’s why it’s called capitalism – money becomes capital by virtue of the fact that it is employed to make more money. This explains why it grows but also why there is unrelenting pressure to find outlets for investment. An alternative name, given by one economist to capitalism, is 'the profits system'.
There is no conscious choice in this. It is why Apple don’t respond to consumer desires so much as think of products and then try to get consumers to want them (which they seem to be very good at. Steve Jobs, said one journalist “anticipated technological desires you didn’t even know you had”). The idea of voluntary choice is the basic error of writers like Lanchester. He argues that, despite the credit crunch, he could discern no general desire to slow down. Actually I think this desire does exist but it can’t be translated into tangible action.
If you feel like you are on a treadmill, that’s because you are.
I can’t get no satisfaction
This inherent characteristic of capitalism, its machine-like ability to create profit which then needs to be re-invested to create more money, explains why it manufactures dis-utility as much as utility.
The credit crunch and subsequent economic depression are a prime example of dis-utility. Banks seeking profits lent to consumers who eventually couldn’t pay back. Those same banks created asset-backed securities as a means of making more money, thus spreading the credit crunch around the world. “The crisis was generated by the system itself,” in George Soros’ words. The same system that generates Tesco and Ryan Air.
The fact that now many businesses cannot get credit from the institutions – banks – that in any rational economic arrangement are supposed to supply credit as a matter of course, is another example of mammoth dis-utility.
The pharmaceutical industry is another case of dis-utility. In France, it has been estimated that over half of prescription drugs are either useless or dangerous. Why is this happening? Because of the overriding need of pharmaceutical companies to use their profits to produce more drugs for sale. The consumer – which capitalist genius is to suppose to satisfy – does not benefit from this need. The opposite is true.
Public services are now a major destination for private investment and thus dis-utility. The director of the British Confederation of British Industry, John Cridland, states in one breath that only business can create jobs, and in the next that a third of public spending should be opened up to competition from business.
In other words, public services should provide an outlet for the investment of private funds.
That this will create spiraling dis-utility is shown by recent history. In Britain, the Private Finance Initiative has seen new hospitals built by private companies, which they then own. It has resulted, on average, in a 30% drop in the number of beds in PFI hospitals compared to ordinary public hospitals. Thus, there has been a large increase in the ‘through-put’ of patients using the reduced number of beds, a major cause of the spread of the lethal MRSA virus. Capitalism in health services has resulted in mammoth dis-utility for “consumers” of hospital services, as well as being more expensive for the taxpayer.
The management theorist, Peter Drucker said in 1939 that the Great Depression revealed capitalism as a system that didn’t serve any purpose but it’s own. That is becoming increasingly apparent again.
Is it possible to have an economic system that does not spurn consumer desires as inherently worthless and strives, within reason, to satisfy them, but one that avoids the glaring systemic flaws and downsides of capitalism?
David Schweickart would say that you can – through a largely market economy made up of worker, not capitalist, controlled enterprises. He argues you can have a market without that becoming a capitalist market and that makes all the difference in the world. But thinkers throughout history, from Aristotle to Karl Polanyi and Murray Bookchin, have criticised markets as inherently destructive of human solidarity and the environment, and the ‘market economy’ is frequently used as a synonym for capitalism. It is to this question of markets, good or bad, that we turn in the last part of this review.