The future of business: what are the alternatives to capitalism?

May 1, 2013

NOTE: Images in this archived article have been removed.

In this Guardian blog, Jules Peck asks what the implications of limits to growth are for capitalist theory, the alternatives, and what it means for business

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Mainstream commentators are questioning growth-obsessed capitalism and revisiting the ideas of Karl Marx.

Evidence shows its very clear we have reached the safe limits to growth in terms of the most pressing threat to human civilisation – that of a stable atmosphere.

Therefore, until we can find a way to decouple growth from carbon emissions and reach that mythical “dematerialised” economy, restarting global economic growth seems a dangerous folly. But what might the implications of this be for capitalism?

Limits to growth and their implications for capitalism

It’s generally agreed that capitalism has three key principles; the majority of “the means of production” (land, resources, capital) are concentrated in private hands; the majority of us work for a wage (ie for other people); and markets are used to mediate between producer and consumer (set prices, etc).

I’ve blogged elsewhere about the problems of the first two, not least of which is an addiction to growth. Put simply, it seems that capitalism cannot be compatible with continued exponential growth on a finite planet. As Tim Jackson has said, “Simplistic assumptions about capitalism’s propensity for efficiency are nothing short of delusional. A different kind of economics is needed.”

In any case, its no longer heresy to point out that capitalism has serious flaws. Indeed, mainstream commentators are questioning growth-obsessed capitalist economics and calling up Karl Marx from his grave.

Both Marx on the left and Schumpeter on the right long ago predicted the end of capitalism. And recently fund manager Jeremy Grantham said: “Capitalism… is totally ill-equipped to deal with a small handful of issues. Unfortunately, they are the issues that are absolutely central to our long-term wellbeing and even survival.”

Finding alternatives beyond capitalism

Jonathon Porrit is right when he says “it seems most improbable that capitalism will prove the last word in humanity’s organisation of human affairs…” But he is wrong to say that capitalism “…is all that is credibly on offer at present”.

There are many alternatives to capitalism. You can be excused for not having heard of them, though, as they don’t shout as loudly as capitalism.

One alternative, Professor David Schweickart’s Economic Democracy, socialises control of enterprises and the means of production, placing resources, factories and other productive capital into the hands of the people and away from the short-term interests of both the state and private sector. Crucially, Schweickart argues this form of economics would not need to rely on growth.

Business beyond capitalism – socialising profits and risks

Professor David Harvey says our economics “privatises profits and socialises risks”.

What would it look like if we shifted to a system that socialised both the profits and the risks, in which we all shared the good and the bad?

Under the vision of economic democracy, workers would control most enterprises democratically. To change to this form of enterprise structure, legislation and subsidies could support us to buy the companies we work in through labour trusts and leveraged buyouts, coupon-based markets or “share levies” on corporate profits.

Bankrupt companies (like RBS) would be restructured as worker self-managed. Enterprises like Spain’s Mondragon Co-operative Group, the UK’s Co-op Group and John Lewis, with revenues of £14bn, £12bn and £11bn respectively, have been shown to be more efficient than most private companies. State-wide examples of co-operative economics include the Quebec Social Economy. Other mass-collaborative forms of enterprise include what has been described as the “fundamentally anti-capitalist” Wikipedia.

Workers would control (but not own) the enterprises they work in and, after paying a “capital assets tax” (a sort of rent) on revenue-generating property, any surplus would be divided democratically between them.

Not all of the “means of production” would be socialised, entrepreneurs would need to be encouraged to start up new enterprises. So that the majority of enterprises remain democratically controlled, any privately owned companies could only be sold to the state, which would then put them into the control of the workers. Likewise, when a private company owner died their beneficiaries might have to sell to the state, again for the enterprise to be placed into worker control.

Enterprises would still interact with one another and with consumers in a market driven by the forces of supply and demand. Innovation and entrepreneurial activity would flourish. This economics would not tend to the need for hyper-consumerism and industry could be guided by market frameworks that shift enterprises from seeing products themselves as benefits to seeing production as a cost of delivering to real (not created) wellbeing needs.

Financial capital would also need to be socialised. The right to create money could shift away from private banks and into the hands of the people via democratically run national banks. Local credit unions could provide for personal credit, but the majority of investments – those made in business – would cease to rely on private funds. The corporate capital assets tax would be paid into an investment fund which was then distributed as investments for future enterprise creation or expansion. We could entirely do away with the private investment sector.

A network of public or co-operative investment banks at national, regional and community level could provide investments and business development services, as does Mondragon’s bank. Funds would be given out on the basis of sustainability and job creation and driven by bottom-up direct democracy, with citizens’ assemblies, participatory governance, budgeting and planning processes similar to those used by places like Porto Alegre in Brazil and now emerging in the UK.

Plan for alternative economy

Whether or not capitalism (in some form or hybrid) can make the grade is still up for debate. But we ought at least to be asking questions about its compatibility with long-term sustainability.

What we are talking about here moves us on from binary, dead dialectics of left versus right, society versus markets and state versus private. Alternative economics could provide sustainable economic development – good lives for all within the limits of our one planet. But the change needed might be radical and vested interests will fight it.

As well as the above ideas, many other changes should be considered, including other alternative economic paradigms and measures such as ending perverse subsidies, land tax reform, absolute caps on emissions, unconditional basic incomes, 100% inheritance taxation, community land trusts, cap-and-share systems and Teqs, to name just a few.

A well thought-through plan for an alternative economy might well come in handy when one day very soon the realisation dawns on society that we badly need a plan B.

As Thomas Carlyle once said: “If something be not done, something will do itself one day, and in a fashion that will please nobody.”

Jules Peck is a director of Flourishing Enterprise, a Trustee of the new economics foundation (nef) and on the advisory board of Richard Branson’s B Team. Jules is involved in a civil society and business inquiry into the issues raised in this article. To get involved, please contact Jules for more information.

Jules Peck

Jules Peck is a Founding Partner at Flourishing Enterprise and co-author of the online (free) wiki book and blog www.citizenrenaissance.com which charts the shift from ‘consumer’ to ‘citizen’ values in society. Jules is also a Trustee of the think-do tank nef (the New Economics Foundation), a Fellow of the think tank ResPublica, Chairman of the Edelman Sustainability and Citizenship Group, a member of the Advisory Board of Richard Branson’s B Team, a Director of the Happy City movement, a Board member of TEQs (the Tradable Energy Quotas organization), an advisor to Transition Networks a member of the Transition Towns training and consulting strategy group and an adviser to The Green Thing.

Tags: capitalism, end of growth