Einstein’s Take on Capitalism, Socialism, and a New Kind of Business

October 30, 2020

A glimpse at the headlines that surrounded the recent presidential election in the U.S., reveals how we are still largely governed by the old dichotomy of business vs. society. Many in the Left dismisses capitalism for fostering greed and exacerbating inequality. Some in the Right respond by dismissing socialism as the truest threat to freedom.

To be sure, there are many forms of capitalism and they cannot all be lumped into the same box — some being more progressive than others. And true, as well, that socialism is not to be equated with ‘statism’, whereby the State becomes a bureaucratic giant that benefits a governing elite while crushing the people and the very society it claims to serve. Terms certainly need to be defined and not confused.

But, despite how much truth or fantasy there may be to such claims, the bifurcation begs a question: How should entrepreneurs, workers, policymakers, and business leaders respond? What path should one follow?

Albert Einstein’s later writings, compiled in his Out of My Later Years, shed simple yet important light on the dilemma. Therein the scientist-turned-philosopher sought to outline what he considered would lead towards better forms of organized human existence.

Assessing Our Times Ahead of Time


The German mastermind opened his ponderings on ‘Why Socialism?’ by asking how society could transcend the “predatory phase” of human development, a label he borrowed from American economist Thorstein Veblen. Despite its ability to go beyond selfish instincts, Einstein nevertheless decried how the society of this time continued to accentuate the “egotistical drives” that deteriorated the weaker impulses that could favor the collective wellbeing.

“The crisis of our time” the scientist sustained, “concerns the relationship of individual to society [whereby the individual] does not experience his dependence on society as a positive asset, as an organic tie or as a protective force, but rather as a threat to his/her rights or to his economic existence.”

The society of Einstein’s day faced unprecedented technological developments and increasing divisions of labor (less so than does ours). And such combination, he recognized, led to an “oligarchy of private capital, the enormous power of which cannot be checked even by a democratically organized political society”. Such a challenge Einstein then saw to be compounded by two realities. First, that technological progress frequently results in creating more unemployment rather than in easing the burden of work for all. And second, that legislative members themselves are preselected by political parties largely financed by “private capitalists” who give increasingly less attention to the underprivileged sections of the population.

“This crippling of individuals I consider the worst evil of capitalism” Einstein lamented. “Our whole educational system suffers from this evil. An exaggerated competitive attitude is inculcated into the student, who is trained to worship acquisitive success as a preparation for his future career.”

Alternatively, the physicist sustained that the aim of socialism was to overcome such a crisis by means of directing the human project towards a “social-ethical” end. “Man [sic.] can find meaning in life, short and perilous as it is, only through devoting himself to society.”

‘Why Socialism?’

However simplistic Einstein’s binary opposition of setting capitalism against its counterpart, these shortcomings contributed to the German genius’ avowal of socialism. And that partially because he recognized that humans are the sum of our direct and indirect relations to our contemporaries and to all the people of earlier generations. We are entirely dependent on society for our existence — something that the scientist saw as a “fact of nature which cannot be abolished”.

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Furthermore, the mastermind questioned mainstream assumptions characteristic of popular strands of economic thinking. Einstein sustained that we can transcend our lower faculties and our sheer selfish impulses and that we are not bound to be subservient to “cruel, self-inflicted fate”. Instead, as rational creatures we can uphold and live into what he called a “cultural attitude” that makes life as satisfying as possible. (Put differently, pride and basic instinct need not trump humility and enlightened intellect.)

Albeit generally, the Jewish physicist hence maintained that such cultural shift implied leaving behind ownership structures that favored the few at the expense of the rest. And it also implied planning and organizing production for use, and not for profit; that is, to go by ‘pull demand’ as opposed to ‘push demand’. (The prescription eventually resonated with Oxford economist E.F. Schumacher’s call to create an economy of satisfaction that met felt needs instead of one focused on endless, manufactured wants.)


“I am convinced there is only one way to eliminate these grave evils” Einstein pronounced, “namely through the establishment of a socialist economy, accompanied by an educational system which would be oriented towards social goals.”

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What can one say today with the gift of 70-plus years of hindsight? Is Socialism the way forward? Should economies be planned at the service of all?

Socializing Productive Capital via A New Kind of Enterprise

Cautious of making sweeping statements, here one must first distinguish satisfying vital needs (such as health, food, education, and housing) versus guaranteeing the consumption of superfluous goods (like using a Gucci purse or eating mandarin oranges from Thailand during the thick of Winter). In principle, the State should guarantee the former; the Market, the latter.

Secondly, surely Einstein’s prescription remains for the most part far-fetched and unlikely — at least when it comes to commodities and consumptive goods. Planned production can often lead to scarcity and inflation. And yet it’s true, as well, that the German scientist did signal how enormous government bureaucracies could easily “enslave the individual” by becoming “all-powerful and overweening”. (Anti-Stalinist novelist George Orwell certainly agreed — even if he did espouse democratic Socialism.)

That said, the healthcare networks in France, Italy and Singapore (all best-in-class worldwide) are examples of how state-owned systems can be both technically-successful and universal in scope. Same goes for electric power generation in Sweden, Norway, and Austria — three countries that have mostly public electric companies while figuring among the top 10 nations in the World Economic Forum’s Energy Transition Index.

Despite evidence like this, more noble forms of neoliberal economics have tried to limit the role of the state, purportedly to avoid huge and stifled bureaucracies and focus, instead, on being lean and efficient in serving their people. At best, they propose that governments should privatize their assets and direct and regulate private enterprises towards social ends.

But the redirecting begs a question: Can standard business models live up to the universal call to provide quality health, food, education, and housing for all? Or do we need, instead, companies with alternative ownership and governance structures designed to extend the reach and humanize the goals of capital? In other words, can business be transformed towards the “social-ethical” horizon that Einstein called for?

Leaving to the side the central importance of municipal politics (a possibility bypassed by Einstein), the answer, of course, is ‘yes’. Drawing from the decentralized, communitarian legacy of the cooperative movement in the 18th and 19th centuries, the last few decades have seen a new surge of new, alternative models of enterprise. Next to well-known worker co-ops, today increasing numbers of B-corps are pursuing greater missions well beyond their porous walls; hundreds of social enterprises continue to address a societal shortcomings using profitable business models; community-interest-companies are reinvesting most of their returns in the community, rather than being driven by the need to maximize profit for owners and absentee shareholders.

Actors like these have been exemplifying a new way that simultaneously avoids the All-Powerful State dreaded by the unconventional scientist, as well as the invisible (and non-existing heart) of the Insatiable Market.

We can only speculate what Einstein would have said of such companies with the heart of a non-profit.

A Signal of Caution

There are, of course, lukewarm outliers among these new enterprises, at times co-opting their mandate at the service of profit. Others, in turn, carry out a social mission but often with scarce attention to governance or ecological factors; as is the case of a social business in Costa Rica, which congratulates itself for nurturing the population by selling industrially-modified packaged foods, but giving little consideration to the agrarian practices behind and within the ingredients themselves. (Asking any agroecologist or food-sovereignty aficionado, one quickly realizes the one-sided benefits of such initiative.)

Likewise, the possibility of the takeover of social entrepreneurship for PR purposes or at the expense of nonprofits is worrying, as is the neoliberal outsourcing of public services to the neo-private sector. (For all one knows, public companies need not be abolished for good, but reformed for the better.)

Giving such precautions the due attention that they deserve, however, genuine ‘hybrid’ or ‘blended-value’ organizations have it as core to their mandate to put capital at the service of humankind and not the other way around. These new kinds of enterprises don’t live to breathe but breathe in order to live. And the experiment has been working to an important extent; at least insofar as it fosters a truly circular, regenerative economy that feeds off nature’s fruit as opposed to cutting down the branches.

A Call for Business-People and Policymakers

Einstein’s question places at least three challenges for the entrepreneurs, policymakers, and business owners of the 21st-century:

1) Imagine and work towards a third way that leaves behind old models

Instead of swinging to the left and to the right (and thus replay the stifled dichotomy endlessly), the company of the future requires us to move forward. Financial capital needs to be socialized, even as society needs to make room for humanized and ecologically-respectful forms of capital. The way ahead calls for the degrowth of bad growth and the growth of holistic wellbeing for all.

For one, it follows that social enterprises paying living wages, restoring the living world, and addressing basic human needs should not be taxed. Substantial legal and tax reform needs to be made to make space and bring these new players to the forefront.

2) Recognize the limits of science and the importance of philosophy and ethical traditions

“Science without religion is lame, religion without science is blind.” Beyond calling for politicians with a more practical and entrepreneurial mindset, as well as businesspeople with a much greater social consciousness, we need to place ancestral ethical and spiritual traditions at the core of our decision-making. Einstein rightly recognized that science can only determine “what is”, while it is the role of religion to establish “what should be”.

Same goes for business and economics and the cold utilitarianism that undergirds them. The company of the future will go far beyond shared value and entirely recreate its raison d’être. A good starting point would be to recognize that humankind was not created for business, but business for humankind — and that we are all guests in a society and in a finite world that is certainly not of our own making.

3) Act boldly, without compromise

The threats and opportunities ahead in the 21st-century are by no means small: ever-growing income disparities not worth describing, rapidly declining levels of diversity in the biotic community, an entire planet at the edge of climate breakdown. Today we simply cannot afford incremental steps in addressing risks like these, because they actually require bold policy-making as well as virtuous, enlightened governance.

What is needed is concerted effort and, above all, faith, hope, and self-giving to respond. In the quest for a more noble society, we must leave behind the shores of comfort and venture instead towards unknown yet far more promising destinations. In fact, business-as-usual must become its own worst enemy in order to survive by reinventing itself and then — and only then — become its new best friend.

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Challenges like these make it fitting to close with Einstein’s summons at the end of his short piece ‘Moral Decay’:

“During the War someone tried to convince a great [] scientist that might went before right in the history of man. ‘I cannot disprove the accuracy of your assertion,’ he replied, ‘but I do know that I should not care to live in such a world!’

“Let us think, feel and act like this man, refusing to accept fateful compromise. Let us not even shun the fight when it is unavoidable to preserve right and the dignity of man. If we do this, we shall soon return to conditions that will allow us to rejoice in all humanity.”

* * *

Besides having cast down our votes wisely, may we also go down… in history as those who were remembered for having gone and done likewise, for we have old and new promising paths right below our feet.

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Citations taken from ‘Science and Religion’,‘Moral Decal’, and ‘Why Socialism?’ in Albert Einstein, Out of My Later Years (New York: Philosophical Library Inc., 1950)


Eduardo Sasso

Eduardo Sasso is a business sustainability consultant and co-founder of Earthkeepers. He recently published A Climate of Desire: Reconsidering Sex, Christianity, and How We Respond to Climate Change

Tags: alternatives to capitalism, capitalism, democratic socialism, new economy