Scrap The Rhetoric. There’s No Such Thing As Capitalism
15th November 2015
Ben Chu at the Independent understands the dialectic.
When Confucius was asked by his students what was the first thing he would do if he were made king, the sage replied: “Rectify the names.”
The answer baffled the students, who had expected their master to say he would promote the virtuous into positions of authority and expel corrupt officials. But Confucius explained his reasoning: “If names be not correct, language is not in accordance with the truth of things. If language be not in accordance with the truth of things, affairs cannot be carried on to success.”
That is why the Forces of Evil spend their initial effort at having a good ‘name’ for name-calling, upon which every other tactic depends. From ‘black market’ to ‘price gouging’ to ‘windfall profits’, the Left knows that controlling the terms of the argument is the first step on the road to winning. And Marx was the original Alinskyite – ‘capitalism’ isn’t really a thing, it’s just a name he created as a stick to beat the people he didn’t like. And everybody has used it as a punching bag ever since, since even people who favor property rights and free markets have taken to using it, since they don’t have any alternative.
But what is this capitalism? What does the word stand for? It’s not a question that is asked enough. The journalist Paul Mason has published a book with the title “Post-capitalism” which, rather irritatingly, lacks any substantive discussion of what capitalism actually is.
The definition is implicit: Capitalism is ‘those ignorant losers who don’t agree with us’. See how it is used and tell me I’m wrong.
But the old concepts are hard to shake. When pressed, people often still describe capitalism as a system under which the owners of financial capital (shareholders) offer up their resources to fund business ventures in exchange for a financial return (dividends paid by a company). Yet few large businesses need to raise money from investors in stock markets any longer. They can fund their expansions from internally generated profits. They are more likely to buy back shares with their free cash flow than issue new ones.
The classic Marxist understanding of capital is economic power as ownership, but ‘ownership’ has become so diffused in the modern world that it has about as much power as owning a lottery ticket. You hope to get lucky, but none of the outcome depends on any action on your part.
Ownership has changed too. Today many company employees are shareholders through their pension schemes. Does that give these workers economic power in the manner of the 19th-century capitalist class? Not really. Economic power usually lies not with shareholders but with the managers of companies, the executives. Sometimes it lies with the financiers who look after people’s investments, the professional asset managers employed by pension funds. But it is virtually never the ordinary shareholder who is in the driving seat.
This is old news among those who have been paying attention. James Burnham wrote it all up in his seminal work, The Managerial Revolution, back before the Japanese bombed Pearl Harbor.
Labels are often a substitute for thought, especially in politics where a naïve view holds sway that economic policies and institutions are either inherently “capitalist” or “socialist”. See “privatisation” and “the NHS” for two examples in the British context. Extremists of both the left and the right are attracted to this Manichean world where good and evil collide.
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“Capitalism” doesn’t really exist. There are various modes of market-based economic, social and legal organisation in rich countries, some of which work well in some respects, and some of which don’t. There is a debate to be had about how to reform those modes to meet the often divergent needs and aspirations of different populations. But there is no magic “capitalist” or indeed “socialist” formula that all should follow. Such 19th-century labels are often an excuse to dodge the difficult job of figuring out what will work.