(Disclaimer : What follows is my opinion, I am not an economist, politician or biologist)
In the human body there are various organs, each has a function and when functioning correctly the whole body performs well. They are all necessary and malfunction of any one can lead to poor functioning of the whole body, or even death.
In cancer a small number of cells — let’s call it the one percent (I think you can see where I’m going with this..) begin to grow and multiply. In doing so the respective organ begins to malfunction and, without treatment the end result is the death of the whole body.
So it is with capitalism. There are various institutions within capitalism and each of these needs to operate correctly for the whole body — in this case society — to perform correctly. If any one of them misbehaves then, without treatment the end result will be the death of society.
The analogy is not perfect, but you should get the idea of my argument.
So, what is the function of capitalism in society, what part does it play? Capitalism is, in a nutshell, the process whereby resources, people & money are pooled to complete risky projects with an unequal distribution of the benefits for the purpose of investing in the next risky project. It is necessary for there to be unlimited growth for capitalism to continue. Growth is the continual innovation of products (Risky projects) for profits to continue to be made.
The unequal distribution is supposed to go preferentially to those who have the vision and energy to organise the pooled resource to achieve a given end, the next risky project. In this way risky projects can be undertaken, preferably chosen such that they are beneficial to the whole of society, with the overall result that sufficient of them are successful that everyone’s ‘well-being’ is enhanced. This is the correct functioning of society.
In a risky project the participants need to receive an income that they can live on during the project and before it begins to make any money, irrespective of whether the project will be successful or not. Otherwise ordinary people would be reluctant to participate in the risky project. Some projects fail, and the investment made from the unequal distribution does not show any returns to the investors, the inequality of returns from successful projects takes this into account. The investors also take this risk into account when starting the risky project. Investors, if they are sensible, should not lose out overall, by diversifying their portfolios, even if some risky projects fail .
To pick up my analogy again the institutions of capitalism are like the organs in the body. These institutions include the Government, who set the rules/policies; the central bank that controls the money supply and interest rates; the commercial banks who make loans and make investments; various investment organisations such as hedge funds, pension funds etc; the stock market (and markets in general); The judiciary and police who should maintain the honesty of these institutions and the individuals who control them. I am not trying to make a direct comparison between these and any organ in the body, their functions are different. But their correct functioning is essential to the health of society.
In the human body the input is food and oxygen, these are converted to useful forms and distributed to all parts of the body, in an unequal fashion depending on need, via the blood stream. The blood, loaded with these nutrients, goes first to the brain which takes all that it needs. It then flows to the other organs which all take what they need. In times of stress, such as vigorous exercise, these organs take more or take less depending on the circumstances. The brain gets fist pick of the resources, it always gets what it requires. In some circumstances of excessive exercise there is not enough nutrients provided by breathing and the store of glucose in the liver — so body fat is burned instead.
There is an automatic, de-centralised, process that distributes the nutrients to where they are needed depending on circumstance. This is done without the conscious intervention of the brain.
In society the inputs are sunlight and the natural world. — That’s it, the only inputs.
Sunlight provides the energy for plants and animals to grow which creates the environment in which humans can flourish. Other forms of energy, such as oil, coal, natural gas (non-renewables) are the equivalent of burning body fat. Unlike a human body, though, the planet does not need to be slim! (Nuclear energy, though, may be a special case in that more radioactive material can be produced than the original amount during the process of energy production — but the waste is toxic.)
In capitalism energy is used to provide goods and services. Those goods and services that are produced are decided by the ‘markets’. If the markets are not functioning correctly then the wrong goods and services will be provided and/or in amounts that are not needed or are harmful rather than beneficial. The principle behind the markets is that they will be correct via a decentralized distributed system of decisions made by the millions of people and ‘players’ in the system. That on average the goods and services provided will be just the right ones in the right quantities and are not harmful.
At the risk of taking my analogy too far I see the markets as that of an obese person. Obesity occurs when the metabolism goes awry and appetite does not seem to be limited or curtailed by the consumption of food. The result is clearly not healthy. The markets are acting as a cancerous organ.
How does society’s appetite become distorted? This occurs because, unlike the ideology of neoliberalism, we are not fully independent individuals, born with our own intrinsic needs and desires. We do not act as rational agents who can calculate exactly what we need and what is good for us — do you always do what is good for you?. What we are is inter-dependent people each being influenced by the consensus of opinion around us and each contributing to that consensus. We are influenced by advertising and by our neighbours’ behaviours. The best comment I have seen to describe this is from anthropologist Mary Douglas, “The objective of consumers is generally to help create the social world and find a credible place in it”. Taking this as our reasoning in making decisions it is easy to understand that the type and amount of a particular good or service is not limited to what is best for the health of individuals or of society. There is a continuing ratcheting effect of the need to show our standing in society is better than our neighbours’ by having the newest car, phone, or whatever the latest craze is. The marketers mantra “Create status anxiety and then sell them the solution”. The unfettered growth that capitalism needs to survive.
Other institutions of capitalism can misbehave. Banks, for instance, have shown via the 2008 financial crisis that they have failed in their function of providing a steady flow of risk assessed money (liquidity) to the markets. A liquidity that provides for the steady flow of risky projects, but not too risky. In human cells there are checks and balances that limit growth of a cell. When these break down it causes unhindered cell growth, which is a cancer. The checks and balances of the banking system broke down. The banks took on very risky loans in the form of mortgages that could never be paid back, re-packaged them to hide the risk and distributed these among themselves so that no-one knew anymore where the risk lay — a kind of metastases of the cancer. Money is like the oxygen in the blood stream. It needs to flow, in the right quantities, to the right place at the right time. The money in the economy prior 2008 was like hyperventilating, and was not going where it was needed!
In cancer the tumour develops additional blood vessels to carry more oxygen-carrying blood to feed the growth of the tumour. In society inequality feeds a disproportionate amount of money to the 1% — the cancerous tumour, whilst the poorer sections of society are starved.
I could go through other institutions and work my biological analogy. Analogies are never perfect so I will not labour the point.
My overall point is that it is not ‘the system’ that is to blame, for an individual institution the ‘system’ is the rues by which it operates. The true cancerous cells here are the people that make up the institution. People make decisions, people make laws, people interpret laws and rules, people lobby for changes in the rules, people enact policies that harm others. People are the cancerous cells. The people who make these decisions that cause severe inequality and leave sections of society under fed and under-valued.
The institutions of our society, from government down, are not operating as needed and as a consequence society is not operating as it should because the institutions are populated by people who are acting as cancerous cells. The cancer, however, is not the cell itself, it is the instructions of what the cell should do. In the case of cancer, it is a fault in the DNA, in society it is the ideology in the minds of the individuals.
To cure our society of the cancer we have to replace the ideology of ‘rampant’ capitalism with something more pragmatic, that can adapt to changing circumstances quickly. It is unlikely that we can change the entrenched ideology within individuals very quickly, especially when those persons jobs depends on demonstrating that ideology.
So we have to change the people that influence the operation of our institutions with those that have no ideology. That means moving away from ideologically based party politics to some form of evidence based policy making. It also means addressing the imbalance of power in society. As in the human body each section of society needs the means to claim for itself as much of societies output as it needs and to recognize when other sections need more than others.
And it needs to happen quickly, before the patient dies.