Three (more) things they don’t tell you about capitalism
Professor Ha-Joon Chang has two things in common with Karl Marx. Firstly he’s right in much of his economic analysis of the ills of capitalism and secondly his prescriptions of the solutions to these ills are lacking.
Chang’s best-selling book 23 Things They Don’t Tell You About Capitalism is a timely and important addition to the most crucial debate of our age. I recommend it as both a good read and helpful resource. But I think his analysis missed out three final and far more crucial ‘things’ to his 23.
Aside from giving an incomplete analysis of the ills of capitalism, Chang’s work fails in that the ‘things’ he misses out (my ‘things’ 24, 25 and 26) are the ones which show both that capitalism is fatally flawed and ireformable and that an alternative is indeed both possible and viable.
So Chang’s book is both an incomplete picture of the problematique and a flawed vision of the future. It fails to take us beyond the desperate attempts to shoehorn the needs of people and planet into the fundamentally broken and misconceived economics of capitalism.
What’s supposedly so great about capitalism?
Whilst Chang is not arguing for an overthrow of capitalism he is scathing of our current neo-liberal version of it. For each of the 23 ‘things’ he starts with a short ‘What they tell you’ section laying out myths he then debunks. These myths are the sales-pitches whose combined narrative persuade us that we can’t possibly live without capitalism.
We are told that society does best where the interests of shareholders, not wider stakeholders’ are born in mind. But Chang refutes this in ‘thing 2’. We are told that capitalism is the best system because it rewards those who are most productive. But in ‘thing 3’ Chang clearly debunks this myth. We are told that capitalism is the only system capable of producing the kinds of things we so badly need – like yet another version of the ipad. Again Chang debunks this in ‘thing 4’. We are told that individuals are inherently self-seeking and cannot co-operate (‘thing 5’) and so we need the market to ensure the highest wellbeing for society. Again this is debunked well and truly by Chang and numerous others.
Another common rationale for capitalism’s value are that only through continuing ‘creative destruction’ and economic ‘progress’, as defined as never ending growth, can we hope to satisfy human needs. The red-in-tooth-and-claw, ever competitive, ever striving for ‘more’ which is key to capitalism’s accumulation drive, is vital to ensure our wellbeing. Otherwise life would sink into a morass of Leviathan-esque life “solitary, poor, nasty, brutish and short”.
But these things are not true. Man can be co-operative and live in reciprocal manners. We are not rational, but we are not entirely irrational either. And the roles which the capitalist mode of production has given us, of labourer and capitalist, are far from the only natural order of things. Perhaps we no longer need to be dictated by the booms and busts of ever-striving profit and accumulation? Perhaps we can all be worker and boss? Perhaps we can plan our economies to serve the interests of all, not just of the 1%?
What Chang got right with his 23 things
Chang is correct about many of his ‘’things’. There is no such thing as a free market (thing 1), and so called ‘free-market’ policies cause far more harm than good, creating huge public bad and few public goods (things 6 and 7).
Companies should not be run in the interests of shareholders (thing 2). We are not smart enough to leave things to the market (thing 16), in any case our best markets are already very much planned economies (thing 19) and indeed more state-led markets give the best outcomes (things 12 and 21).
All of these challenge the underpinning narratives that keep capitalism ‘credible’ (to some). The next three ‘Things they don’t tell you about capitalism’ suggest that an alternative to capitalism is both needed and possible.
Thing 24 – Growth does not equal happiness
Ever increasing economic growth (the rational for capitalism) long since ceased to bring increasing marginal returns to wellbeing. In the ‘rich world’ wellbeing has flat-lined since the 1970s. So in fact, all the extra growth and wealth we have accumulated since the 1970s could be distributed more fairly and could arguably satisfy all the basic needs of the worlds 7bn.
A few facts might help to make this point. The combined wealth of the world’s 500 wealthiest people is equal to that of the bottom 60% of the world’s population. The top 1% in the US have more wealth than the entire bottom 90%. Just one of these individuals’ wealth – say Warren Buffett’s – could increase the wealth of 1bn of the world’s poorest people by around 20%.
So the key rationale and driver of capitalism, the ‘treadmill of accumulation’ makes no sense any more. We don’t need to keep accumulating and transforming the natural world into yet more ‘stuff’. We can share out what we have already and merely replace that in a sustainable manner as needs be. So whatever form of economics we might need, we don’t need capitalism and all its ills.
Thing 25 – Limits to growth
We have reached the limits to economic growth on which Capitalism depends. Just in terms of climate change, as we show in this blog, we need to halt, and in the rich world find a reverse gear for, any further expansion of the global economy.
Chang does touch on issues of environmental limits in his book. But he fails to understand how fundamental these challenges are to capitalism’s expansionary dynamics and urgently we need to respond if we are to save humanity from unliveable conditions.
Combine these two things, ‘thing 24’ and ‘thing 25’, and you start to see that there is no real need for capitalism anymore. It is neither necessary for satisfying our wellbeing needs, nor is it possible without plunging our one and only planet into a state which would fundamentally undermine the needs of our children and future generations. So capitalism comes with numerous attendant ills and yet it is not even necessary.
What is missed by ignoring ‘things’ 24 and 25
What Chang misses is that the downsides to capitalism and its myths are in fact the inevitable outcome of the dynamics of the ‘treadmill of accumulation’ and the ‘capital surplus absorption problem’. These negative effects of capitalism are not just unfortunate by-products of a misfiring engine. In many ways they are the engine.
Inequality and poverty, consumerism, deb-tonation, polluted values, the rollercoaster of boom and busts economics the creation of dangerous financial products. All of these ills and more are the direct and inescapable outcomes of capitalism on a finite planet.
Chang is either unaware of what we now know about wellbeing and natural limits or he ignored these factors because they would not have fitted with his desire to find a way to save capitalism. In ignoring ‘things’ 24 and 25 it is possible to assume that we might ‘make capitalism nicer’. If all that extra growth and ‘stuff’ fulfilled our lives and if we lived on an infinite planet then maybe ‘nicer/greener’ capitalism would be possible.
This badly underestimates just how non-negotiable are the core characteristics of capitalism. It is these core characteristics of the absolute and never-ending requirement for capital-accumulation and profit which cause the many ‘things’ he lists. But he assumes that these 23 ills can be assuaged by tinkering with the operating system, a patch here and a patch there. What he misses is that these patches will do nothing to confront the reality of ‘thing 25’ – absolute limits to growth.
And because he is not aware of the alternatives to capitalism, (thing 26) and how much better they can deliver prosperity and ‘good lives for all’, his thinking and horizons have been self-limited and constrained. We should not let our own horizons be so constrained.
Thing 26 – There are alternatives to Capitalism.
So what of the alternatives?
Time and time again we are told by otherwise thoughtful people that ‘there are no alternatives’. But this is wrong. There are many alternative visions and forms of economics around. They might not be as well PR’ed as capitalism. But then that’s hardly surprising since capitalism works well for the world’s most powerful men – who happen to own much of the world’s media.
Beyond-capitalism economics already exists in pockets of experimentation around the world. The most obvious of this is perhaps the co-operative movement which, along with State Owned Enterprises (SOEs), already makes up a significant proportion of the economy.
You could call this new economics ‘Sustainable Wellbeing Economics’ or, as Professor David Schweickart calls it in After Capitalism, ‘economic democracy’ and ‘democratic socialism’. Or, as Professor Erik Olin Wright calls it In Envisioning Real Utopias, ‘participatory democracy’. The name does not matter. What does matter is that it is built around the principles of the need for a democratic and sustainable model of economic ‘progress’ or ‘development’, which most equitably satisfies the human needs (not wants) of all 7bn of us.
Whilst there are no blueprints for such an economics there is a huge amount of work which as been done by people like Schweickart and Olin Wright as well as others like Professor David Harvey (his Enigma of Capital is another must-read). All three of these are distinguished academics at leading US Universities. And their work is far from just academic. It is based on extensive examination of real, existing and emergent elements of this new form of economics.
Time for change
“Capitalism is not beautiful”, said John Maynard Keynes. “It is not intelligent, it is not virtuous and it not just. But when we wonder what to put in its place, we are extremely perplexed.”
We can no longer stand by in a perplexed manner as capitalism causes civilization to nosedive into the ground. Allowing capitalism to continue to collapse in an unplanned way will be painful. As Thomas Carlyle put it, “If something be not done, something will do itself one day, and in a fashion that will please nobody.”
In fact we no longer need to stand by perplexed. We know far more than was known in Marx’s or Keynes’ day. We have the benefit of years of experimentation with capitalism, markets, state planning, co-operative and ‘commoning’ movements. From the work of countless Nobel Laureates we know far more about the bounds of human rationality, about reciprocity, behavioral economics and game-theory, about welfare and wellbeing economics, about the possibilities and limits of human ingenuity and technology.
Its time for us to set aside our fears of going beyond capitalism, a system we have got so used to and so mesmerized by, that we have become blind to its faults and its alternatives.
As Einstein put ”Insanity is doing the same thing over and over again and expecting different results.” Or, as Professor Tim Jackson has said “that ecological damage should be the result of a series of consumption practices which clearly fail to increase wellbeing has all the characteristics of a social pathology.”
It is time we proved ourselves sane and dared to dream of, and develop an alternative.
I’ll finish on a quote from Professor Chang’s conclusion in ‘The 23 Things They Don’t Tell You About Capitalism’,
“Nothing short of a total re-envisioning of the way we organise our economy and society will do.”