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The end of capitalism is not nigh

Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets.

Are we entering a post-capitalist future? Intellectuals on the left would like to believe that the economic upheavals of the 21st century are able to transmute the failure of the grand socialist projects of the 20th century into a new, high-tech revolution of the people. They’re right, but all they’re really seeing is free markets at work.

“The end of capitalism has begun.” So starts a lengthy column in the economics section of The Guardian, brought to my attention last week. It was written by music teacher turned journalist Paul Mason, who earlier this year left his position as economics editor at the BBC’s Channel 4 to escape the constraints of impartiality. He describes the ideas in his most recent book, Postcapitalism: A Guide to Our Future, as “left of social democracy”.

As with previous books, he approaches the political, social and economic upheavals since the turn of the 21st century from the perspective of the working class. He draws parallels between the original working class of the 19th century industrial revolution and those who protest globalisation, austerity and the so-called “neoliberal consensus” today.

Mason is a great writer, and clearly has a good grasp of the history and political context of the labour movement. The column in question is very well worth reading. He begins with the observation that instead of the market being destroyed by using the lever of the state, as 20th-century leftist imagined and recent economic upheavals might have signalled, “[i]nstead over the past 25 years it has been the left’s project that has collapsed”.

The reason, he argues, is that individualism has replaced collectivism and solidarity, and the working class no longer thinks or behaves as it once did. The saving grace for disappointed leftists, he thinks, is technology, which has the power to “[reshape] the economy around new values and behaviours.”

He describes a techno-Utopia as post-capitalism, which to him seems as different from capitalism as the industrial revolution was from feudalism. It will take root within the old system, not as a revolution, but as an “emergence of a new kind of human being”.

The driving forces, in his telling, are three major changes technology has brought. The first is a reduced need for work, thanks to automation. The second is the rise of abundant information to replace the scarcity of goods and services, which undermines the price mechanism. The third is the rise of collaborative production that undermines or circumvents formal economy channels, such as cooperatives, parallel digital currencies and carpools.

Alongside technological progress, we have seen economic crises around the world, which he says led to both fiscal austerity and monetary excess. Public finances are in disarray the world over, and long-term stagnation is an ever-present fear. Economic and social upheaval have also had political consequences, the most visible of which has been the decision by the United Kingdom to leave the European Union.

It is tempting, therefore, to go along with Mason’s thesis, that this signals the end of capitalism as we know it. He puts his finger on a key problem in the modern economy: that information apparently “wants to be free”, as Stewart Brand once put it.

To some extent, he is correct. It has been hard to transition from an economy based primarily on physical manufacturing to one in which information becomes more dominant. Charging a price for something that can easily be copied is a challenge.

However, Mason shows his hand when he describes the system of capitalism as we know it as “neoliberalism”. This label has never been used as a descriptor; it has always implied disparagement. But although he pins his hope for the left on the co-operative production by individuals free of government or corporate control, this is exactly what the term neoliberalism means: maximising individual freedom by limiting government interference in the operation of free markets.

He confuses the corrupt symbiosis of corporations and government, in which crony-capitalists support politicians in return for protection from competitors, with private, free markets operated on a level playing field. What has been missing for the last century is the level playing field, and this is what technology now offers.

Just as the technology revolution is in no way socialist in nature, the real culprit for the world’s present state is not capitalism, per se, but a particular perversion of it introduced by statist economists such as John Maynard Keynes. He provided governments with a way to spend beyond their means, by controlling the supply of money. Chronic, long-term inflation would slowly erode the value of the money in people’s pockets, while also deflating the value of debt. As long as people had faith in governments, the illusion of prosperity could be maintained.

Every time economic activity seemed to falter, governments would simply make money and credit cheaper, and spend more on public works, thus artificially stimulating investment and spending. The problem is that not all investments are equally worthy. Stimulus money invariably ended up in asset classes that otherwise would not have received the investment. That’s why the stock market loves economic stimulus, even though it makes hardly any difference to the ordinary man in the street.

Repeated episodes of monetary stimulus and malinvestment inevitably set the market up for a “correction”, leading to the boom and bust cycle with which we are so familiar today. Free market advocates have long predicted this, as I wrote five years ago. It was explained more than a century ago by Ludwig von Mises in his book The Theory of Money and Credit (the full text of which is available for free, thanks to the damn greedy capitalists). Booms and busts aren’t a product of free markets, but of government intervention. Economic liberalism is the antidote.

What Mason really describes is not the end of capitalism, but the fall of Keynesianism. The new activities he observes are all products of free people operating in a free market. The decentralisation, efficiency, co-operation and price-cutting that he notes are the effect of new competitors arising to challenge staid incumbents, as well as their new-found ability to use technology to bypass government controls over commerce and taxes. He is simply describing a market that is freer, not some new system of economic organisation that needs a new name.

The things he imagines will be priced at zero, thanks to the rise of automation, collaboration, copying and sharing, will not actually be free. They will be cheaper, and perhaps much cheaper, than in the past, but goods, services, ideas and time cannot be conjured out of thin air. Capital will not disappear. Its distribution will change, towards innovative individuals and voluntary groups that are best able to apply it to production. But free individuals organising together to produce the wants and needs of society is a normal process of capitalism.

Mason writes: “[To] make [the transition to post-capitalism] happen, the entire project of the left, from protest groups to the mainstream social democratic and liberal parties, will have to be reconfigured. In fact, once people understand the logic of the post-capitalist transition, such ideas will no longer be the property of the left – but of a much wider movement, for which we will need new labels.”

We don’t really need new labels, from an intellectual point of view. Free-market capitalism has always sought to reduce the state to a mere protector of life, liberty and property. It relies on the price mechanism, but it has never had a problem dealing with products that are cheap, or even free. It has always rejected unnecessary constraints upon economic activity, denounced political cronyism, and advocated free competition to undermine conservative economic, social and political structures.

I’ll agree that if you used to believe in “super-computed Five Year Plans”, as Mason describes the old ideals of the left, it might be hard to accept that socialist dream has died. So imagine how hard it must be to admit that popular resistance against monetary policy excess, crony-capitalism and corruption, fuelled by economic dissatisfaction and technological opportunity, is nothing other than free market capitalism at work. That it wasn’t capitalism that was the problem, but Keynesian statism.

It is perfectly possible to reconcile the concerns of the disgruntled left with the idealism of libertarians who support free markets and individual choice. If we need to relabel the rise of free economic activity outside established government and corporate structures as “post-capitalism”, perhaps a re-branding is in order.

I’m not convinced by Mason’s economic explanation, but I do admire his optimistic vision for the future and his readiness “to be Utopian”. He appears to distrust the government and corporate elites that got us into this mess in the first place, and seems to appreciate the freedom to innovate, collaborate and share on terms set by the people who participate in the economy. So do I.

The ideal future still looks like one of free markets and individual liberty, but if it’ll make leftists feel better to call it post-capitalism, instead of the post-Keynesianism it really is, I can go along with that. DM


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