Why has capitalism been so enduring?
Does it reflect the human condition?
Following the global financial crisis there was a great deal of talk about the emergence of a post-capitalist future. These were the days of Occupy Wall Street and popular discontent about the way in which life is organised. It even gave rise to distributed currencies, of which Bitcoin is the most noted, that were going to disrupt the capitalist system. None of that has happened, so where did all of that protest get to? What is it that makes capitalism such an enduring way to organise human affairs? What are the sources of its endurance?
The notion of capitalism arose in the Romantic era. Although it had been given form in previous writings, the idea of capitalism is often associated with the works of Karl Marx. From a Marxian perspective, capitalism is associated with the accumulation of capital as part of a class interaction between the owners of capital — the capitalists — and the owners of labour. The two classes had an essentially competitive and zero sum relationship over the means of production. If we limit our view to this narrow definition, then we are currently living in a post-capitalist world because Marx described a world that no longer exists. However, that is an unhelpful and inadequate conclusion.
It might be more helpful to start with the features of capitalism to discern some of the dynamics that have led to its longevity. The core of capitalism is private property and the operation of markets. Written into the human condition is the desire to trade our current situation for one that we think might be better. Markets are a means by which we can swap what we have for what we would like to have. There are other means, such as forced seizure, plunder, and looting, but these haven’t stood the test of time as a means of distributing wealth. This is because they fail to secure established property rights.
Established property rights are central to the operation of a market based system because they provide a legitimacy to title that is necessary if two people are to trade with each other. The role of money is to facilitate this process. Trade is made so much easier if there is a generally accepted common denominator for all goods — a monetary value that provides an exchange rate for all goods. This is why Bitcoin struggles as a currency. It does not have the stable value relationship with all goods and services that, say, the US Dollar has. As a means of exchange, it is extremely limited.
There is a further dimension that needs to be introduced at this point. If the fundamentals of capitalism are private property and market exchange, then what system of government best guarantees these conditions? It is often argued that liberal democracy is the best method of government to secure private property and market based exchange. The ‘liberal’ part of the equation implies a respect for individual property rights, and the ‘democracy’ part of the equation provides a consensual framework for collective action. This is why capitalism is often accompanied by a liberal democratic framework.
At this point it could be objected that China currently operates a capitalist system, but is far from being a liberal democracy, as the phrase is understood in North America and Western Europe. This is true, but we could question the extent to which private property rights are respected in the Chinese system. For example, the recent crackdown on the operation of technology companies in China points towards a system where private property rights are respected, but only up to a point. Capitalism with Chinese characteristics doesn’t feel like capitalism at all. It feels a little too arbitrary. A little too illiberal. Which brings us back to the liberal democratic framework.
If we adopt a purely Marxist view of capitalism, two rather large problems arise. The first is what are called pre-capitalist capital accumulations. The second is the operation of the features of capitalism prior to the establishment of capitalism. These are serious objections.
A tour of the stately homes and cathedrals in England gives a view of what pre-capitalist capital accumulations might have involved. Whereas a number of the grand houses and buildings may have been established using loot and plunder, they were maintained over the centuries by trade and commerce. It was the landed gentry and aristocracy who gave impetus to the Industrial Revolution in England, as they attempted to secure greater returns on their capital employed, whether it was from domestic ventures or from colonial ventures. They gave rise to the paradox of the pre-capitalism capitalists. If we delve even further back in time, we see medieval capital accumulations in the form of castles and landed estates. If we reach into the time of Rome, we see capital accumulations in terms of villas and landed estates. Arguably, the richest man in history was Marcus Licinius Crassus — an archetypal capitalist of Republican Rome who made his money from real estate speculation, military provisioning, and the operation of silver mines. This indicates that the capitalist system was in operation centuries before it was defined as such and that its operation has a very long history.
We can see this if we revert to the features of capitalism. The one feature that links Republican Rome, medieval Europe, and Enlightenment England with today is the operation of markets. All of these systems resolved the distribution question through the use of markets and trade. All of these systems respected the rights to property, of sorts, within the confines of the time. They all acknowledged the democratising force of money. For example, Crassus was a plebian, not a patrician, by birth. Money and trade were the means for social advancement, even in medieval Europe. If there is a footprint of a capitalist society in pre-capitalist times, then we have to ask about the degree to which we can consider capitalism a form of modernity?
However, it is also the case that Roman capitalism and the form we experience today are also worlds apart. We have to consider why that might be? The Romans were comfortable about basing a social and economic system upon the institution of slavery that was fed by military conquest. We would consider this system with revulsion if it were to be proposed today. This revulsion represents a shift in the attitudes and values of society away from military conquest and slavery. And yet the footprint of capitalism — private property rights and the operation of market based trade — continues to today. What has happened in the intervening years is that social attitudes have evolved and the institutional framework has evolved with them.
This gives us an important clue about the continuing endurance of capitalism as a form of social and economic organisation. A social institution is unable to exist detached from the society it serves. It has to reflect the values of that society in the way in which relationships are conducted. As social attitudes have evolved over time, so has capitalism as an institution. It also gives us a hint about the future development of capitalism.
In many respects, capitalism does provide a reflection of the human condition — the acquisitive desire to own material goods, to trade to a better standard of living, to enjoy peacefully those goods. On this level, talk about a post-capitalist future is likely to be a bit premature. If we were to move to a post-capitalist society, some consideration would have to be given to the distribution mechanism by which who does what is determined. There would need to be a value shift away from an acquisitive society. This is not impossible, but it is also fair to say that there isn’t much evidence of that just yet.
This argument is a little disingenuous because it misses an important point about the capacity of capitalism as an institution to evolve over time. The prospect of a transformation of capitalism is likely to have a better future. There have been a number of transformations of capitalism in the past, which suggests that there could be more in the future. The likelihood of this happening is increased further as the world continues to play down and ignore the disruptive potential of climate change. We can speculate about the form that the next phase of capitalism will take, but it’s quite likely that it will have some form of green tinge to it.
Capitalism has proven to be quite enduring over the centuries because it is wired to the human condition. This is likely to continue, but the shape of the institution is likely to change, reflecting the underlying shifts in the values of society. More a case of evolution than revolution.
© Stephen Aguilar-Millan 2024
