The Nazis and capitalism: the reign of the unorthodox

If the idea of the Nazis being socialists is crude propaganda that still leaves the question of how to correctly categorize them economically and politically. There is doubtless a brand of deterministic Marxism that will assert that between 1933 and 1945 capitalism had to take the genocidal and apocalyptic form it actually did in Germany in those years. But I don’t think that’s true. Economically, National Socialism was profoundly irrational – nihilistically dedicated to total war against enemies (the US and the Soviet Union) that it had no real chance of defeating. And it was even more manically dedicated towards the extermination of the European Jews. As is well known, deportations of Jewish people to the extermination camps took precedence over military necessities even in the time of looming defeat. If ‘capital’ was secretly in the saddle in the Third Reich years, it evidently had a death wish.

But at the same time, as remarked upon in part one, capital accumulation and profit-making were inserted into the very fibre of the Nazi economy. The death camps were privately insured, Zyklon B was supplied by a subsidiary of I.G. Farben and famous, brand-name firms ran slave labour factories in the vicinity of the death camps.

The only conclusion, I think, is that capitalism, given the chance, will happily operate under a variety of political cultures – and unapologetically assert its interests – but the nature of those cultures is not something exclusively determined by capitalists or their acolytes. As noted by David Schweickart in After Capitalism, there have been many different kinds of capitalism – Keynesian liberal, state developmental (as practiced by Japan and South Korea), third world “comprador capitalism”, our neoliberal version and, of course, the current Chinese model where the state retains a great deal of control through ‘state owned enterprises’ and rules out any complications resulting from multi-party elections. The original Marxist concept of a capitalist base determining the superstructure of culture is far too simplistic.

So the Nazis – and Hitler in particular – were quite aware of the existing power structure and the social role they had to play in order to get into power – eliminating organised labour and the Marxist threat. But they were not bound by economic orthodoxy – they needed to tap into and channel mass desires and discontents. This can be clearly seen in their rise to power.

Their increase in popularity was astoundingly rapid – the Nazis gained 2.6% of the vote in 1928 but by the summer of 1932 they were the largest party in the German Parliament, gaining close to a 38% vote share. Traditionally, this has been ascribed to the Great Depression and the mass unemployment it generated – nearly 18% of the workforce was without a job in 1932. But this is only a partial explanation.

The response of the German government to the depression was to institute crushing austerity. Under Heinrich Brüning of the Catholic Centre party, who was known as the “hunger Chancellor”, public spending was cut by 15% between 1930 and 1932. The largest falls in were in housing and healthcare spending and there were also significant reductions in unemployment benefit, payments to pensioners and support for the disabled and war veterans.

 Heinrich Brüning, the "Hunger Chancellor"

The Nazis campaigned on an anti-austerity platform, saying they wanted to preserve the social insurance system, demanding “generous expansion of support for the aged” and advocating building highways. Researchers who have analysed the NSDAP’s route to power found a strong correlation between austerity and both increased votes for the Nazis and people joining the party. Conversely, the socialist SPD – though outside government – passively supported austerity, and the Communists benefited mainly from increases in unemployment.

In power, the Nazis similarly went against the economic grain. They instituted massive state funded public work schemes in housing, land reclamation and highway construction (the famous autobahns).Tax reliefs were given to companies that created jobs and increased investment and unemployment was reduced from six million in 1932 to less than a million four years later. Of course, the main reason unemployment so successfully conquered and economic depression warded off was that the economy became wholeheartedly dedicated to rearmament and war (wehrwirtschaft or ‘war economy’ in Nazi parlance). War was not just a result of Nazi foreign policy; the entire economy was geared towards it happening.

Nazi economic policy – cutting taxes, spending money and instituting public works schemes – could in fact be described as Keynesian except that it was before Keynes. He most certainly existed at the time but his most important work – The General Theory of Employment, Interest and Money – wasn’t published until 1936. As economist Joan Robinson put it, “Hitler had already found how to cure unemployment before Keynes had finished explaining why it occurred”.

Except that Hitler didn’t cure anything. He had no interest in economics and outsourced economic policy to a banker called Dr Hjalmar Schacht, who had enthusiastically backed the NSDAP as they neared power but never actually joined the party. Among Schacht’s many departures from orthodox economics was a money printing scheme which created 12 billion marks out of thin air between 1935 and 1938. The money was used to pay armaments manufacturers and didn’t appear in the government’s budget. Any resemblance to quantitative easing is purely coincidental. But let’s just say it didn’t end well.

Why is this relevant, beyond historical debates about what National Socialism actually was? Well, over the past decade the Left has been confronted with an apparently ultra-orthodox and unyielding economic approach that demands cuts in public spending – austerity – to deal with an economic downturn. Past over-indulgence putatively makes this medicine thoroughly deserved – witness the UK general election campaigns in 2010 and 2015.

It has escaped attention that 21^st century austerity is only half orthodox. It insisted on massive cuts to public spending – cuts that caused destitution and death – but responded to the threat of private sector bankruptcies with ultra-low interest rates, bail-outs and unconventional money creation schemes (quantitative easing again). Stern, unbending austerity for the public and endless indulgence for the ‘wealth creators’.

Austerity is now fraying at the edges – the Conservatives in the UK are trying to claim it’s over even though it plainly isn’t. However, this is only partly because it’s gone on so long without achieving its supposed aims – the deficit in the UK was meant to be erased by 2015, remember. It’s also because a new, ‘natavist’ Right has little patience with it. Donald Trump in the US is many things – misogynist, racist, serial liar, idiot – but he’s not a purveyor of austerity. This was former Greek finance minister, Yanis Varoufakis, talking about Trump in the Guardian newspaper in June:

The Trump administration is building up a substantial economic momentum domestically. First, he passed income and corporate tax cuts that the establishment Republicans could not have imagined even in their wildest dreams a few years ago. But this was not all. Behind the scenes, Trump astonished Nancy Pelosi, the Democrat’s leader in the House of Representatives, by approving every single social program that she asked of him. As a result, the federal government is running the largest budget deficit in America’s history when the rate of unemployment is less than 4%.

I’m old enough to remember when record, civilisation-endangering budget deficits were what the Left was bound to bring into being if it got anywhere near power. When way back in 2012 Niall Ferguson evinced that young people should “welcome austerity” and that “if young Americans knew what was good for them, they’d all be in the Tea Party”. But Trump’s record deficit has not put off enthusiastic former Tea Party members in the slightest. His “dedicated supporters”, says one article, “are many of the same folks who made the Tea Party the dominant force in American politics in 2010”. Ferguson meanwhile says Trump’s tax-cut fuelled, deficit building “is not something I can enthusiastically condone”. Maybe we should all join the Tea Party … oh wait.

But it’s not just Trump. The Italian government currently engaged in a face-off with the European Commission over its budget plans to introduce a €780 a month ‘basic income’ for unemployed Italians and to decrease the pension age is not of the Left. It is a coalition between the anti-establishment Five Star Movement and the far-right Lega. The government’s deputy Prime Minister is Matteo Salvini who has promised to deport 500,000 ‘illegal immigrants’ and been compared to Trump. But this is a government that insists it wants to “abolish poverty”.

I’m not suggesting there has been a Damascene conversion of the Right to anti-austerity. There are still many fiscally orthodox right-wingers around, such as the Austrian Freedom Party and Bolsonaro in Brazil. But as patience with never-ending austerity grows thinner and thinner, we can expect a much more flexible attitude towards it on the Right. And as the Nazis showed, there are clear historical precedents.

What means is that policies cannot be judged as being Left or Right merely in terms of whether they alleviate poverty and redistribute resources. To be classed as Left they also have to tilt the balance of power away from capital and the elite in favour organised labour and the citizenry. This is something the nationalist Right will never do.

Why capitalism can't save us. Review of 'After Capitalism'. Part 2.1

2.6 billion people are living on less than $2 a day, many major cities are surrounded by sprawling slums of misery, carbon emissions are rising faster than they were in 1990, Arctic sea ice is melting more rapidly than anyone anticipated and unemployment and poverty are rife in many countries. A list of bad things happening in the world is not difficult to compile. But why are these manifestations of present and future suffering the responsibility of the economic system – capitalism – now predominant across the globe? Are they not, as is commonly argued, regrettable but inevitable facets of life arising from flawed human nature?

You can’t persuasively criticise capitalism by waving your arms and saying how awful things are. As Schweickart says, to be convincing you have to show a causal connection between the structures that define capitalism and these bad features. “A serious critique,” he writes in After Capitalism, “must show that these negative features would not be present or would at least be far less prominent, if certain structural elements of capitalism were altered and that such alterations would not have other worse consequences.”

I want to examine five such negative features of capitalism that Schweickart highlights in his book. I will add a sixth. The features are examined from the point of view of some living in a developed, democratic capitalist country. That’s not intended to pass over the often far worse circumstances of poorer countries. It’s simply what I know most about and have experience of.

I also want to talk about the positives of capitalism. Why, beyond the quiescence of careerism or powerlessness, it still commands a grudging adherence. I was going to do that in this post but it would be too long, so it will appear in a following post, shortly.

Here is Schweickart in debate (and he does, as the presenter says, have amazing eyebrows):

First, the negatives.

1 Inequality

This feature would not, perhaps, have occupied such a stellar position twenty years ago. It was once believed that eventually everyone in the world would live like a middle class American, says Schweickart. “No-one believes that now.” Now, not even middle class Americans live like middle class Americans. In 1960, the US, the average pay of chief executives compared to all workers was 42-1. In 2007 it was 344-1. At Walmart, the US’s biggest employer, it’s 900-1. In the 1970s, Britain was one of the developed world’s most equal countries, now it is one of the most unequal. Inequality between rich and poor countries is even more extreme and worsening.

Capitalism has always involved great economic inequality. After the Second World War this characteristic was restrained, in western countries, by high taxation of wealth and collective bargaining. But both those elements have waned.

Schweickart asks a basic question. What’s wrong with inequality? Let all the children grow tall and some taller than others, Margaret Thatcher used to say. A rising tide lifts all boats was the mantra of the Right in the ‘80s and ‘90s. The trouble is that the tide isn’t rising. It is, literally rising, but not in a wealth sense. Wages have been stagnating in the US for 30 years and have been dropping in the UK since 2003.

The problem, says Schweickart, is that the structures that generate this inequality also generate desperate poverty and compromise democracy. Great and concentrated wealth at the top of society enables those that have it to skew the political process in their interests.

But we can add that inequality has two other effects. One is that, as the book The Spirit Level showed, problems, such as mental ill-health, incarceration, obesity and violence, increase in intensity the more unequal a society becomes. Secondly, inequality played a big part in causing the economic paralysis afflicting the US and Europe. A “wall of money” at the top of society has been used for destructive speculation. While inadequate income in society at large has both caused the crisis (the original credit crunch was precipitated by Americans not being able to meet mortgage repayments) and made exiting recession very difficult.

2 Democracy (lack thereof)

We, in the West, have free elections and a choice of parties to vote for. If enough people want to form anti-capitalist parties and seek votes, no-one will forcibly stop them. In France they have them in name. Therefore, we live in democracies.

Not so fast. The formal accoutrements of (representative) democracy does not mean we have democracy in content. Schweickart says we live in polyarchies.

A polyarchy exists where a country has free elections and a multi-party system but one class is dominant and its view and needs predominate. These views are propagated through party funding, lobbying, and the use of think tanks that create and mould public opinion.

But there is a deeper reason for the constrained democracies we live in. That is the formidable economic power of the owners of the economy and everyone else’s material dependence on maintaining their confidence. “A capitalist economy is ingenuously structured,” says Schweickart. “Almost everyone has an interest in maintaining the spirits of its ruling class …. So long as the basic institutions of capitalism remain in place, it is in the rational self-interest of almost everyone to keep the capitalists happy.”

And when the capitalists aren’t happy they can indicate their displeasure in very powerful ways. In August 2012, UK Conservative chancellor George Osborne reversed a £2 billion tax rise on the oil industry after companies responded to the rise by cutting production by 18%, and thus revenues to the UK Treasury. 

The writer Dan Hind has said the public is only audible when it echoes governing assumptions. If people think unemployment benefits are too high, they entrench government policy. But if they think tax should not be cut for the rich, they are instantly mute.

Even at its theoretical best, capitalist democracy only applies to the political system. The economy can only be influenced indirectly. Under Schweickart’s plan for worker controlled enterprises and social control of investment, democracy is extended to the workplace.

3 Environmental Degradation

“Only a madman or an economist could believe that exponential growth can go on forever in a finite world,” so spoke the late economist Kenneth Boulding who is quoted in After Capitalism. But capitalism believes, if it 'believes' anything, just that.

This is the inherent environmental flaw in capitalism. It grows. “Capitalism is enormously productive,” says Schweickart. “Every year, 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.”

The ever increasing consumption required by this process has been made possible in recent decades by consumer borrowing. Of course, as we are painfully aware now, capitalism doesn’t automatically grow and this tendency, in its environmental implications, will be considered shortly. But the significant point is that capitalism is a system without internal limits. In 2007, a British professor of engineering worked out that, based on an economy growing at three per cent a year, we would consume resources equivalent to all those we have consumed since the emergence of humanity by 2040.

  

This growth is manifested through the gradual exhaustion of natural resources, the steady encroachment of physical development into rural areas (happening now in the UK through the erosion of the “green belt”), and the release toxic by-products of production and consumption such as carbon emissions and nitrogen-based fertilisers used in farming.

What would defenders of capitalism say to the charge that the system is ecologically unsustainable? Firstly, and very loudly I imagine, they would point out that the environmental record of capitalism’s historical rival was terrible. Pollution under Communism was chronic. In the early 1980s, northern Bohemia in Communist Czechoslovakia had the worst air pollution in Europe. By 1983, 35% of all Czech forests were dead or dying and one third of all Czech watercourses were too polluted even for industrial use. Though the main environmental bane of Communism, it should be said, was pollution, not growth.

Secondly, a pro-capitalist would argue that, through capitalism’s association with liberalism and free elections, environmental activists can, externally, bring capitalism under control and make environmentally destructive behaviours unacceptable. Think of the film Erin Brockovich.

“Thanks to the efforts of determined environmental activists in virtually every advanced capitalist country, air quality is better now than it was two decades ago and rivers and lakes are cleaner,” writes Schweickart. “Environmental protection laws have been passed and “green” taxes and imposed in many countries.”

There are several points to make in response to the belief that capitalism is compatible with a flourishing environment.  Firstly, environmental activism can’t alter capitalism’s integral growth dynamic, it’s “grow or die” impulse, as the social ecologist Murray Bookchin put it. As a result the best environmentalism can do is ameliorate the worst effects. “Things getting worse at a slower rate”, is how the late environmental activist, Donella Meadows, described the situation.

Secondly, in the low or no growth world we are entering, environmental priorities are being sacrificed to meet the short-term need to revive growth. “We can’t be ambivalent about growth,” is how the UK government’s “planning” minister, Greg Clark, justified reducing regulations to make it much easier to approve building development in the countryside.

Thirdly, many polluting practices in western countries that have become culturally unacceptable have been exported to poorer countries, where people have less power to make their objections count.

Lastly, the experience of the 21^st century has shown that when environmental activism directly confronts huge capitalist industries like oil, automobiles and mining, it does not win. The 1987 Montreal Protocol was the last successful international agreement to change capitalist behaviour. The protocol called for strict restrictions on chemicals that deplete the ozone layer (chlorofluorcarbons) and the results have been impressive. But, says Schweickart, the industries affected had substitutes to hand, and the protocol “should not lull us into thinking capitalism can accommodate all sensible environmental solutions.”

With climate change and carbon emissions it has been a very different story. There are cleaner ways of generating energy than burning oil and cleaner way of transporting people than using cars, says Schweickart. “But it is hard to envisage the transition to these cleaner modes that preserves the status and income of these giant industries,” he says.

But the problem goes deeper than corporate resistance, he argues. Phasing out chlorofluorcarbons did not affect consumption habits. “A transition away from carbon-based energy almost certainly would”.

The consequence of the conflict between environmental sanity and profit has been that many capitalist countries – most notably the US – have been unable to change course to ameliorate climate change. Not only this, a political culture has developed that denies the existence of climate change even when its effects become harder and harder to ignore.

This seemingly intractable problem is intimately related to the fake democracy examined in section two. In a 2011 report, the head of Greenpeace International, Kumi Naidoo, said that governments don’t take action on climate change because they have “captured” by corporations responsible for it.

“These polluting corporations often exert their influence behind the scenes,” the report said, “employing a variety of techniques, including using trade associations and think tanks as front groups; confusing the public through climate denial or advertising campaigns; making corporate political donations; as well as making use of the "revolving door" between public servants and carbon-intensive corporations.”

Finally, what of the prospect that dysfunctional capitalism, an economic system that produces low or no growth, may, in an unintended way, be beneficial to the environment? Less destructive than a healthy capitalism that achieves growth of 3 or 4% a year. In 2009, because of the dramatic drop in economic activity, carbon emissions fell for only the fourth time in 50 years.

Less destructive, perhaps, but not less destructive enough. What western capitalist countries need, for ecological sustainability, is de-growth, not spluttering growth or GDP flat-lining. They need to reduce their consumption. And while growth proves elusive, politicians obsess about its resuscitation. Thus, environmental considerations lose any priority they possessed.

But equally significant is that a dysfunctional capitalism not sustainable. It was the end of economic growth in the 1980s and economic stagnation that doomed Soviet Communism. “If rich countries cease to grow,” writes Schweickart, “their own economies will implode – so will the economies of poor countries, increasing the level of poverty, increasing the level of environmental degradation that poverty entails, and decreasing the amount of funds available for environment damage control.”

Enough already

I realise this is enough for one post. In part 2.2, I will consider three other basic features of capitalism: Unemployment, overwork and instability.

In 1930, a very famous economist predicted that, in 100 years, inhabitants the US and Europe would work three hour days and fifteen hour weeks. Their main preoccupation would be how to occupy their abundant free time.

He could not have been more wrong.

Wealth creation for dummies. A review of 'After Capitalism' by David Schweickart. Part One

What exactly is capitalism? That might appear a strange question to ask, fifty-plus posts into a blog about, erm, capitalism. But if you’ll forgive the tardiness, this is an inquiry that needs to be pressed.

While capitalism is a noun that attracts adjectives in abundance (crony capitalism, free-market capitalism, and now the oxymoronic humane capitalism), the noun itself remains largely uninterrogated, an unexamined presence. Everyone is supposed to understand what capitalism is – it’s all around them after all – but it’s remarkable that something so taken for granted is seldom defined. I’m convinced that many people who define themselves as anti-capitalist have only an intuitive sense of what they are against.

Perhaps you can be too close up to something to fully grasp it. Maybe you don’t really know the people you’re closest to.

David Schweickart is an American mathematician and philosopher who published a book in 2002 called After Capitalism. Aside from elucidating an alternative to capitalism, he attempted to define it and describe its consequences. After Capitalism isn’t a howl of outrage against “the system” but a rational effort to go beyond TINA (‘there is no alternative’)

Reviewing Schweickart’s book is therefore a good way to look at capitalism in the cold light of day: To examine what it is (which may be very different from how it is commonly perceived) to look at its faults, to say what’s good about it and what the alternatives to it are. There is, I believe, an unconscious and very prevalent fear, that interfering too deeply in the workings of the mysterious capitalist machine will lead either to the government controlling everything, with lethal consequences for freedom, or, alternatively, plunge us into a technological dark age and anarchistic chaos. Refusing to be awed or intimidated by what is, after all, an economic system that humanity has rejected for the vast majority of its history is a path to confronting those fears. The review will be in three parts.

Here is Schweickart speaking (with others):

Say cheese! The C-word in focus

Schweickart gives a three part definition of capitalism. Firstly, he says, the bulk of the means of production (offices, factories that produce goods and services) must be privately owned, either by corporations or individuals. This was traditionally called by the Left ‘private property’ which is unfortunate, Schweickart says, because it implies that homes, cars and toothbrushes will all be confiscated and “communalised” in any revolutionary change (think of John Lennon’s Imagine). These things were, to someone like Karl Marx, not ‘private property’ but ‘personal property’ and would not be seized by anyone.

Secondly, products are exchanged in a market. “Individual enterprises compete with one another in providing goods and services to consumers, each enterprise trying to make a profit,” says Schweickart. “This competition is the primary determinant of prices.” The state owning all enterprises and deciding that to produce by means of a plan, as in the old Soviet Union, is not capitalism. Neither is it capitalism when the local community owns most of the economy, as with social ecology.

But, says Schweickart, it is an “ideological distortion” to use “market economy” as a synonym for capitalism. They are not the same thing. Enterprises within a market economy can be organised differently. They can be controlled by their workforce. This is significant because, when it comes to imagining a “post-capitalist economy”, Schweickart says it will be populated by worker-controlled firms operating in a “decentralized market economy,” a system he calls “economic democracy”. This is contentious on several levels and I will critically examine Schweickart’s proposals in Part Three.

Lastly, he says, capitalism, to be capitalism, has to be based on wage labour. This means that most people, of working age, have to rent themselves out to others, who own the “means of production”, in order to gain the resources to survive and consume. “It is a crucial characteristic of the institution of wage labour that the goods or services produced do not belong to the workers who produce them,” says Schweickart, “but to those who supply the workers with the means of production.”

It is this reliance on wage labour, says Schweickart, that gives capitalism its susceptibility to crisis, its downturns and booms. Economic health, under capitalism, is based on what Keynes called “effective demand”: the purchasing power of the millions of wage labourers. But this demand is formed from wages or salaries, the consequence of what is negotiated from employers for whom wages are just another cost. If that happens, private investors can lose confidence and companies do not spend the profits they have amassed.

This, says Schweikart, is one of the “central contradictions” of capitalism. An in-built conflict, you might say. “Wages are both a cost of production and an essential source of effective demand,” says. “Capitalist firms are always interested in cutting costs, expanding markets and developing new products. But to the extent that the first of these goals, namely cost cutting, grows in importance relative to the other two, effective consumer demand will tend to be depressed – and hence also those “animal spirits” of investors. This can mean a stagnating economy and rising unemployment, perhaps on a global scale.”

So, if most assets are privately owned, economic exchange takes place in a market, and most people are wage labourers, a society is capitalist.

But, within these parameters there are different kinds of capitalism. The twentieth century had quite a varied palette of capitalisms. Post-war Japan and later, South Korea, were examples of one version where the state directed investment to certain favoured parts of the economy and had a bias towards exports (a type of capitalism the economist Ha-Joon Chang is enamoured by). After the Second World War, Western Europe and the US had for many years a form of managed capitalism, based on collective bargaining and the state ownership of some parts of the economy. West Germany went in less for state ownership and instead practiced ‘co-determination’ – workers were elected to company boards. After 1980, this changed, especially in the US and Britain, in that trade unions were “zapped” and much of what the state did was privatised.

This has morphed into a strange economic constellation where the rich and corporations are subsidised by the taxpayer while the rest of the population is subject to the discipline of free enterprise.

Perhaps this is just an extreme manifestation of a state of affairs that was there all along. “I watched with incredulity as businessmen ran to the government in every crisis, whining for handouts or protection from the very competition that has made this system productive,” wrote one William Sutton, Treasury secretary under US President Richard Nixon in the 1970s.

The point is that real-world capitalism can, and invariably does, radically depart from the textbook “free market” model, but it’s still capitalism.

Love me, I’m a wealth creator

We can see from this definition there is one conspicuous absentee – the “entrepreneur”. In conventional justifications of capitalism, the entrepreneur looms very large indeed, especially during economically tough times. In fact, in conventional explanations, the entrepreneur is capitalism. In the UK, Conservative business minister, Michael Fallon, says we should salute entrepreneurs as “Olympic Champions” who deserve adulation for creating wealth and jobs.

But conservatives are not alone in celebrating the entrepreneur. The left-wing economist Stewart Lansley, author of The Cost of Inequality, differentiates between the deserving and undeserving rich. One of his favourite examples is the industrial designer, James Dyson, who merits his wealth, says Lansley, in contrast to someone like Philip Green who makes money from taking over existing businesses. Dyson creates wealth, says Lansley, but Green merely transfers it to himself.

But Schweickart says both these understandings are ideological distortions. He does not deny that entrepreneurs exist or they merit a reward for their contribution, although frequently they merely copy what has gone before (new coffee shop anyone?) Any society needs people who invent new products or technologies. But what Schweickart does deny is that entrepreneurs are capitalists.

From Marx, Schweickart gets the insight that all wealth derives from labour. “As any economist will confirm,” he says, “unless labour costs are less than the value added by labour, there will be no profit.” So entrepreneurs create something and ethically are entitled to a reward. Workers literally produce goods and services. Managers supervise production. They all contribute something.

But what do capitalists do? The answer, says Schweickart, is very little. They have an entirely passive role. They watch their wealth compound by virtue of the fact that they have quite a lot in the first place. “In a capitalist society, enormous sums are paid to people who do not engage in any entrepreneurial activity or take any significant risk with their capital,” he writes.

As an example consider the National Express Group, which operates buses and trains in the UK. The major shareholders in, and therefore owners of, National Express are the Cosmen family, a Spanish family who “first entered the transport industry, in a horse-and-carriage operation, in 1728”, a hedge fund called Elliot Partners who very persistently pursue very high returns for the immensely rich people who invest in the hedge fund and an investment company called M&G. None of these investors are entrepreneurs.

We are now in the ideological belly of the beast. An entire economic system is justified by virtue of its vital role in creating wealth when it is primarily about the receiving of wealth by a small minority that other people create.

To be a capitalist, says Schweickart, you must own enough productive assets to be able to live comfortably on the income they generate. In the US, he says, and he wrote this in 2002, this comprises about one per cent of the population. Sound familiar?

The investment game

So why does putting money in the capitalist investment game, in normal times, yield results? Why do stock markets, bond markets, investment banks and currency markets produce positive returns? Most pensions are invested on the stock market and charitable foundations derive their income for grants from endowments in shares. “One gets something for nothing because someone else gets nothing for something,” explains Schweickart. “Investment income, the reward to those who have “risked” their money by channeling into financial institutions … is possible only because those who produce the goods and services of society are paid less than their productive contribution. If capitalist distribution were really in accord with the principle of contribution (as is often claimed), the investor would get nothing.”

Two things follow from this. One is that share dividends are, in Schweickart’s words, “a tax on enterprise” and should be abolished and replaced with a capital assets tax. The second is that the real problem is not the stupendous consumption of the very rich but what they do with the money they don’t consume, the money they invest. Control of investment should pass from the capitalist class to society as a whole. He calls it “social control of investment”. I will look at this in detail in part 3.

In the next part, I will examine Schweickart’s take on how far the problems of society, such as environmental degradation, a hollow democracy and poverty, can be laid at capitalism’s door. But I also want to look at the appeal of capitalism and why people are so scared of moving beyond it.

“Most workers, especially those in rich countries, have far more to lose now than just their chains.”