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A Future History of Capitalism

After the coronavirus pandemic, do we need to look hard at our whole system? Yes, we do. But our critique should pick the right targets: outdated structures, and an idea of human nature which hinders self-determination.

Capitalism has come to end. They’re saying it on TV, on Facebook, all over social media. It’s all going down the tubes, the whole thing’s a write-off. It’s all over now, obviously. So they say.

The same judgments, all over again. The same three-ring circus. But these misdiagnoses also form part of our Western cultural canon. These endlessly recurring critiques of capitalism are vague, so vague that they say more about the critics than the subject  that has them so concerned.

Are humanities and social science elites insulted that filthy lucre rules the world, rather than their own utopias and visions? Do the critics really know what they are criticizing? Can they say what kind of economy should take the place of capitalism? Can they put something forward capable of achieving anything like the prosperity enjoyed now in the West, in China, or in India?

Do they really have alternatives capable of providing the “greatest happiness to the greatest number,” as  John Stuart Mill put it? Or is their passionate negation meant to cover up their failure to develop sustainable alternatives?

These are not rhetorical questions, especially not now, in an epoch of pandemic and recession, which forms the background to the transformation from an industrial society to a knowledge society. Anyone who puts the question: “Is old-style capitalism still fit for purpose?” (meaning, of course, the market economies of the industrial nations) must be able to supply something better than what they so glibly criticize. But the same is true for die-hard defenders of the status quo. Pro-capitalist and anti-capitalist positions have become institutionalized and self-referential. What we need is something else: accessible capitalism. This type of capitalism must find its own way forward, businesslike but putting trust in people.

This is what I want to write about here, a third way, a market economy, capitalism for a self-conscious and self-confident civil society. Civil capitalism, which can pave the way for an open knowledge-based society.

But before getting into that, we should analyze relations as they currently are, figure out what we have at our disposal. Another capitalism is possible, but only if we are clear what we are talking about.

Self Determination

We owe John Maynard Keynes the insight: “the difficulty lies not in the new ideas, but in escaping from the old ones.” Old thinking now is industrial culture and the economy of hard work. The word industry, coined from the Latin industria, underlies that economy, which brought us everything we came to regard as normal, including mass production and the society belonging to it. Over the course of two hundred years, things have gotten so mixed together that it is hard to see the wood for the trees. But as Peter Drucker, visionary thinker of the knowledge economy, would put it, this state of affairs is actually a precondition for productive knowledge; it shapes the capacity of knowledge to “recognize connections.”

In other words, it is about understanding complexity, rather than reducing it to nothing. Digitization is nothing less than the continuation of automation processes which, to all intents and purposes, have gotten rid of routine work. Just as machines are replacing human power, network and algorithms are turning on their own inventors. If you only see a dystopian future, you don’t have enough imagination: what remains specific to human beings, something of which they have an infinite supply: individual work deriving from their personality and their own talents. No longer will we do the work ordered by others, “personally dependent” and “in service to another,” as German law on employees (in German, the word translates as “work-taker,” a telling phrase) would have it. Instead, they sing “intellectually and emotionally, we will work on our own account.”

None of this is entirely new. If we think of industrialization as a family, the most successful siblings have been automation and the division of labor. The latter always means specialization. The more you know, the more independently you can work. This is why knowledge is power, more than ever now, when it is combined with personality, individual know-how, and expertise. This development will advance all the more quickly if others can also have access to the benefits of specialization, as far as possible without barriers.

When ability creates a context, a market arises. The market economy is simply successful communication between those who have an ability and those who need that ability to fulfill their own needs. The knowledge economy cannot exist without participation and cooperation; for its part, this kind of participation requires self-confident, self-conscious agents at every level. This is something rather different to the “iron cage” described by Max Weber, with its older forms of dependency.

Reason versus Passion

Capitalism is not what has created bottlenecks within industrial societies. On the contrary, capitalisms are tools for openness and flexibility—so flexible that even using “capitalism” can sometimes be misleading. For this reason, social scientists tend to suggest that capitalism is an “essentially contested concept,” i.e. one that is constantly under challenge. The concept and its meaning are fought over in terms of people’s deepest worldview. But the “market economy,” a more concrete term for what we are talking about, is an event, a process in motion.

If something like this runs up against passionate republicanism, things can get problematic. Anti-capitalism is pure republicanism in the French Revolutionary spirit, in other words Enlightenment turned back on itself. The Revolution wants to create equality and pluralism, in others words, it wants to tap into complexity. But this quickly gets out of control, with the emergence of a politics of feeling, which tip over into simple patterns and explanations.

The current transformation makes this more visible than ever. What is at stake here are solutions for a mass society, simple collective answers. It is not capitalism in the dock, but rather the political simplifications, the reducers of complexity, the equalizers, the levelers-down. Our culture is on their side, let’s not kid ourselves.

For most people, pluralism and its systems are regarded as a threat. But the knowledge economy, like its civil society, functions according to other patterns. It is about grasping complexity, not reducing it any further. Less-is-more, the battle cry of the present day, is pure nonsense.

Even in a place where the boss—this is a good thing—puts more store on quality and the satisfying of personal requirements, instead of pure quantitative growth, as in industrial and consumer society, that is not something “less” in the sense of a new “overall view,” instead, these movements are on to something more, as prosperity leads one to want more than just more of the same.

In 1941, Abraham Maslow developed his pyramid of human needs. It is composed of five principal levels: existential needs, security needs, social needs, individual needs, and, finally, self-fulfillment. Our ancestors had their work cut out to meet the first three levels of needs. But human beings are more sated now, and better off. They want to be seen, they demand the fulfillment of their own personal needs.

We see this every day: everywhere, respect and recognition as a person, as a gendered person, as a colleague, is becoming ever more important. At the top of the pyramid stands Maslow’s self-actualization, which means optimally unfolding one’s own talents, including for the well-being of others.

Abundant mass production and automated routines are no longer enough to assuage needs at this level. As with industrial capitalism, they are at best a foundation. Quantity gives way to quality. The market economy is a pluralistic system, which can only be created with cooperation, differentiation, and joy in innovation. It is the operating system of an open society. Totalitarians, dictators, distant elites—they get on just fine without capitalism. But everyone else who wants their share of prosperity, the chance to make a go of things. It is not about the abolition of the system, it is about reinterpreting it. And making use of it.

Ruses

In his brilliant The Dynamic of Capitalism, French historian Fernand Braudel gave us perhaps the best definition of “the system,” which he called the “sum of ruses, processes, habits, and efficiencies.” This is not a doctrine of stasis at all. It is not the theory that anti-capitalists and method-obsessed economists are so eagerly seeking. Anyone who has tried to precisely describe the essence of capitalism has proven little more than that it cannot be done.

Max Weber sought the essence of capitalism in religion, in other words, in culture. This was also Braudel’s path. But this trail is only approximate, it only works in combination with one’s own experiences in dealing with behavior in the market economy. The tool assimilates to cultures, it coalesces with them. There is no one capitalism, there are hundreds of them. One study, which economic historian Werner Abelshauser is fond of quoting, identifies more than 750 varieties, all substantially different. Culture and social customs determine the economic toolbox. All capitalisms are the image of the cultures in which they operate. Globalism, in which cultural differences allegedly no longer exist, only seems strong if you don’t look too closely. Everywhere, cultures are the real rulers, the interpreters of market-economic methods and their ruses lead to highly variable results. Unification attempts regularly fail.

Japan’s form of capitalism, for example, is strongly focused on the state, incorporating the traditionally strong relation between citizens and the government. American variants are happier with risk, they take their lead from the individualist pioneer. China’s capitalism established the state as its own enabler, which attempts to achieve prosperity goals with the help of a highly dynamic (and often brutal) industrial capitalism. “Rheinisch Capitalism,” a variant closely associated with the history of the Federal Republic of Germany, is the social market economy which demands participation: “Welfare for all,” as Ludwig Erhard defined it.

This core is lost because of struggles over capitalism, which are basically culture wars, religious wars in a way. Neoliberalism is turned into a perfidious conjuring trick of the economy; in fact, the term refers to the “social liberalism” described by the German economists Walter Eucken and Wilhelm Röpke. The aim of social liberalism was to put the tools of the market in the hands of as many people as possible, in order to achieve more self-actualization, more self-determination, and more freedom. Systematic criticism of and opposition to market economies are fed by the primacy of the state and its institutions, over and above the free market. This leads to the opposite of what many critics intend: an expansion of the rights of the free individual.

Even today, many people live in a world of the oikos, the household economy, whereby a strict but fair father hands out whatever is available. Since ancient times, this has been the favored concept for thinking about economics. The claim it makes is as follows: there can be no more than this. The cake can only be divided up once, and we should do so as fairly as possible. “Fixed pie” is what economic psychologists call it: the belief of all those who never learned to bake.

Moreover, this belief is ahistorical. Human cultural development has always built on our capacity to use thought, renewal, transformation, and development to make more out of less. As a species Homo Faber has been successful, but it not very self-confident. Uncertain people cling to power, which promises security. There oikos is recommended, because power must be distributed. Shouldn’t enlightened people take it over themselves, instead of subjecting themselves to structures which are so hostile to innovation and emancipation?

In 1848, the Communist Manifesto by Karl Marx and Friedrich Engels conjured up the spirit of the bourgeoisie and its economic tools, through which man is “at last compelled to face with sober senses his real conditions of life.” Marxism, says the Manifesto itself, is “sweeping away all long-standing fixed things.” In other words, it helped to get rid of the Ancien Régime. That spirit consists of reason, sobriety, pragmatism—the whole Enlightenment schtick, in other words. Thinking for oneself, Kant’s goal for the Enlightenment, is not an end in itself. It should constantly critique, challenge, and test reality anew.

A civil society worthy of the name knows how to help itself: it designs. Almost all conspiracy theories, on the extremist wings of both left and right, are based on economic illiteracy. Marx and Engels were not the first and will not be the last who knew that there is no freedom without economic self-determination. Successful emancipation always means one thing: to free oneself of outside control and dependencies. Self-determination cannot be delegated to authority or ideology. Whoever wants freedom must understand economics, and know how to apply it. That is the spirit of civil society, of civil capitalism.

The Industrial Comedy

In this way, the theater of Western anti-capitalism, so often filled with boos, in fact presents a comedy of mistaken identity. If people knew what the market economy, in other words: capitalism, actually is—a system leading to the acceptance of the individual and of pluralism—maybe they would applaud, who knows? But they perceive something else, and in fact this other thing, which has disguised itself as the market economy, is not something we can use as an operating system. It is industrialism, also called industrial capitalism: the figure who stands between us and a successful transformation of the economy.

Industrialism does not need people to think for themselves. It needs a norm-bound, regulated society, collectives with interchangeable individuals. It needs command and control structures, and it needs a strict state to regulate, to create the famous/infamous conditions for “investment security,” the thing endlessly demanded by business associations and lobby groups. In this variant of industrialization, the primacy of politics is never questioned. If sales don’t take off, they demand subsidies and purchase bonuses. Education purely services production and its subordinate areas. It is not a question of learning to learn, in other words, of thinking in new and innovative ways. The focus, in fact, is on educational collectivism, or, fulfilling the plan.

Industrialism has no interest in emancipating human beings, although this is a delicate paradox as it does make a contribution to it. In other words, it first creates the material basis necessary for its own super-secession. This, as Maslow would regard it, takes us from the first three secure levels of his hierarchy up to the upper two levels, where human beings can be what they are meant to be: self-determining.

Nothing less than this is at stake. We are lacking advocates of civil society—who should always also be civil capitalists—to take economic fate into their own hands. In this way, hundreds of millions of people have escaped poverty in recent decades. It was not passion and not ideology which made such a fundamental change to circumstances in China and India. It was the sober gaze of the market, here so misunderstood and unrecognized.

“The unified world has become a real thing,” wrote Joschka Fischer in his foreword to Jagdish Bhagwati’s In Defense of Globalization. A clever, hopeful book, which soberly collates evidence for the successes of the “system,” despised by so many in Germany, because they do not understand how much their own lives are dependent on this system for the continued existence and functioning of what they criticize. The alternatives to constitutive capitalism are always close at hand. They include violence, poverty, hunger, and dictatorship. Let us look soberly at these facts and at our social relations. We do not need to force ourselves to do so. Reason is enough. Let’s make sure this resource does not run out. Let us increase and multiply it.

Source: Berlin Policy Journal

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