Capitalism has some capacities for equilibrium, but it lacks the capacity to equilibrate in a wider sense, to deal with its own dynamic imbalances.
The capitalist idea has dominated the history of modernity, both in its appeal, and in the revulsion it has elicited, and then in revulsion against the systems that were borne out of that revulsion. Its strongest appeal is the promise of plenty — making available to the many levels of wealth that were once only available to a very few. This was what attracted the people of eastern Europe in 1989: shops full of goods rather than empty shelves. The medieval era saw sanctity in poverty, but in a modern capitalist economy there is little love or respect for poverty, only pity or neglect.
Capitalism was not a political party or a program. But as it took shape it took on some of the characteristics of a program or manifesto. We can now see that these were a series of deals, perhaps appropriate for a system founded on trading. One promised that if a society gave power to capitalists in the workplace, the net gains in wealth would outweigh both the feelings of disempowerment and the fact that the capitalists would take a large share of the surplus. Even if all gained unequally, all would gain.
Another was the promise that restless experimentation and innovation, including widespread failure, would achieve such gains in productivity and wealth that they would more than make up for the waste of duplication and failure. And a third promised that the huge overheads associated with a market economy, the insurers, accountants, lawyers, and intermediaries who in some estimates make up over a third of all jobs, would also pay their way through the dramatic growth made possible in the whole economy.
These are very surprising claims, quite at odds with the medieval or renaissance mentality. No one could pretend that they are common sense. They were not self-evident to the people in the midst of them, the investors or traders. They were not evident to Adam Smith or David Ricardo, neither of whom had a feel for the vast coordination tasks of a modern economy, or its dependence on science and technology. But they were also dynamic deals — they promised a ride with no visible end point, no final utopia; instead, endless growth and an endless multiplication of desires and the means of meeting them.
All societies have suicidal tendencies: In monarchy the tendency to grossly excessive military spending and debt, and in religion the tendency to become so hypocritical that even supporters are disgusted. In capitalism, the suicidal tendency is toward wild risk and debt, overexuberant optimism and untrammeled greed. As with predatory animals, too much success can be counterproductive. With animals the problem is that the prey disappears. In markets, the risk is that extracting too much profit leaves too little investment in the future, and the pillars connecting the foundations of lived value to the elaborate towers and turrets of monetary value crack.
The many criticisms made of capitalism didn’t go away because they continued to hit home. They highlighted its weaknesses. Its predatory tendencies have been reined in again and again, but they have also repeatedly reemerged. Capitalism has some capacities for equilibrium within itself, but it lacks the capacity to equilibrate in a wider sense, to deal with its own dynamic imbalances. And so societies have been in a continuous dialogue, and sometimes struggle, with capitalism to contain its excesses, to cope with the costs, to channel its productive capacities usefully.
The anti-capitalist revolutionaries dreamed of a mirror world, a world that would be opposite to what they saw around them: without property, without money, and without inequality and predators. We need these utopias to help us see the world as plastic, to protect us from the tendency to see what is merely temporary and contingent as permanent and natural. And we need radical ideas that challenge what is, to be able to imagine a world without waste, whether of matter or people; to be able to imagine a world that gives as much attention to relationships as to money; to imagine time and happiness as the universal currencies, the measures of things; to imagine walking lightly on the earth.
But the mirror worlds have not materialized. Their impact has come through interaction with the worlds they critique, not through replacing one with the other.
The revolutionaries thought that a frontal assault could accelerate the switch from the present to the future, from black to white, from hell to heaven. The alternative is to approach problems at a tangent. That is a poet’s way, and perhaps now we prefer a poet’s way, to find our way around problems, to seek hybrids, alliances of opposites, impure compromises, and to be wary of the human brain’s love of coherence when impure compromises may serve us best.
The hope of progressives throughout the modern era has been that it would be possible to embed reciprocity and love at ever larger and more complex scales, and to channel selfish and predatory ambitions into the common good. Two centuries of modernity has made it possible to see intelligence and wisdom as the most important capacities that any individual, group, or society can have, and that these can be better organized to make the most of millions of brains. Democracy, markets, universities, the Internet and new semantic webs are all tools for orchestrating that intelligence with varying degrees of success. The later stages of modernity have made it possible to see well-being and happiness as the most important goals that intelligence can be directed toward. And they have confirmed that relationships are the source of most of what we value, rather than things or abstractions.
So what place is there for capitalism? Any advanced economy needs capital. It needs stores of value. It needs money to finance its great projects, the development of new technologies, and the growth of ventures. And it needs markets to help with these tasks since they are better mechanisms for allocating money to competing causes than the alternatives.
But as we’ve seen, capitalism no longer serves these functions well. It has become detached from the real economy; capital has come to serve capital, not value; and financial systems have too often become predators. The result is not just a periodic crisis of economics and of excessive risk. It is also a crisis of sense and meaning. A system that promises productivity, service, and the elimination of waste too often delivers profligacy and contempt for customers.
What we need are capital markets that can accumulate money and can intelligently invest it. But to do that well the degrees of separation need to be kept few; the players need incentives that align their interests and those they are meant to serve; and every part of the system needs proportionality, the right balance of risk and assets. All of this then needs checks and balances: strong media, strong institutions in civil society to scrutinize, to warn, and sometimes to shame. Just as governments need all of these things to be kept honest, so do banks and investors.
My argument suggests a different future to the traditional accounts in which capitalism was to be overthrown and replaced by a wholly new order. It also challenges the common story accepted by most professional economic commentators and practitioners in which capitalism simply continues with business as usual long into the future.
Just as likely is a slow marginalization of capital and capitalist power in their current forms, as other forms grow: concentrations of capital guided by social and environmental goals as well as commercial ones; circular production systems; the civil and social economy; the ever-growing social industries, providing health care, education, and support; the collaborations of cyberspace and new tools for collective intelligence; the household reasserting itself as a place of production; the worlds of parallel exchange systems, collaborative consumption, and time accounts.
An analogy can be found in what happened to monarchies and empires. Two centuries ago the world was run by monarchies. There were occasional republics, like the great Italian cities or the young United States. But the wave of revolution that had begun in Paris in 1789, and reached its climax with the guillotining of the royal family, had run its course. Many leading thinkers had concluded that democracy was an aberration, an experiment that had been tried and failed. Monarchy by contrast was bound to succeed because it was rooted in human nature: human beings are designed to live in hierarchies, and societies are bound to be divided into the weak and the strong, with the strong in charge. Anything else was soft-headed wishful thinking. Worse, any attempts to empower the people would ultimately end in bloodshed. Only kings and emperors, in service to God, could guarantee order.
As we know, each element of this common sense was turned on its head. Although monarchy pervaded every sinew of social life, from the passing of laws to the award of honors, and from land ownership to warfare, its naturalness proved deceptive. Monarchies were soon relegated to the margins, surviving only as quaint anachronisms, limitless divine right replaced with limited and largely secular responsibilities.
Analogies are risky tools for reasoning with. But they can help us to imagine, and to avoid the tendency to see plastic, temporary social institutions as endowed with permanence. We can at the very least imagine a fate for the barons and monarchs of contemporary capitalism not so dissimilar to what befell the all-powerful rulers of a previous era: less deference, less respect, and in time less power. Few can confidently claim that capitalism is rooted in human nature in face of abundant evidence from psychology and social psychology that while acquisitiveness and greed are part of our nature, so are cooperation and care.
The institutions of capitalism may soon be replaced by changed views of wealth.
Nor is the superiority of the private firm as self-evident as it once appeared. Instead, in some very diverse sectors, we are learning about the value of pluralism in economic life, the effectiveness and resilience of models that share ownership or that explicitly commit themselves to social or moral missions as well as profit. Economics for a time aspired to be a universal science. A more realistic and modest view sees it as a collection of regularities, but without any permanent laws; a sophisticated craft for making sense of money and value, but not a science capable of too many predictions.
My argument suggests that the dominant forms of contemporary capitalism will be displaced by new forms that reflect ideas latent in capitalism: changed conceptions of growth; changed conceptions of the role of human relationships; changed ways of thinking about value.
From these we should expect to see radically different kinds of organization and service being born — more open, more relational, more rooted in life — as well as different ethics and aesthetics. Elements of these possible futures can be found in every advanced economy — they are the seeds waiting for conditions to change so that they can grow into the mainstream. Those conditions are as much conditions of success as failure, and the new forms of economic life are more likely to spread as the consequences of growth rather than of no growth, of material abundance rather than lack, even though crises of growth may precipitate their advance. As such, they may thrive in many possible future scenarios — from a future “pax Sinica” overseen by a hegemonic China, to a more fractured global apartheid, or a world where the older powers of Europe and North America revive like phoenixes.
The monarchies had their most glorious years just before they lost power. Some lost it suddenly. Others saw their power wane slowly, as par liaments chipped away at their prestige and functions, turning them from being paramount institutions in their society, the magnets of both love and hate, to becoming marginal.
It is too soon to predict with confidence a similar fate for the dominant institutions of capitalism. But there are good reasons for doubting that they are at a high noon. They may be at a moment more analogous to that of the sun before it sets, shining gorgeously before it sinks toward the horizon. If that is the case, they may soon be replaced by changed views of what wealth is, of how wealth is created, and of how wealth should be used.