• November 3rd, 2011 • Posted in All posts

The current occupation of the square outside St Paul’s cathedral higlights for me a problem in the modern world.  Lots of us can see what a rotten, cruel and dangerous system capitalism is, but few of us have a blueprint for an alternative system that would actually work.

Once upon a time, the generally accepted alternative to capitalism was socialism: state ownership of the means of production.   But this is an idea that has lost its appeal since the collapse of the Soviet system.  There are still those who argue that the Soviet system was an aberration from ‘true socialism’.   I personally am not convinced by that any more.  I think socialism does require a very overbearing and very intrusive state like the Soviet Union, because it means stopping people from doing things that people are naturally inclined to do: make deals, accumulate wealth, gain the maximum return from the exercise of their talents.  (In fact, incredibly intrusive and controlling as it was, the Soviet system didn’t in any case stop people from doing those things: it just drove these impulses underground, and let them find expression in ways that slowed the system down even more.)  Certainly a socialist system wouldn’t need to be tyrannical  if everyone was very very nice and very very selfless – but on that basis any system would be kind and just and fair.

However the idea of a ‘pure’ market system, untainted by state intervention, is equally utopian and actually incoherent.  For a market to deliver its benefits there must be competition, but this competition has to have rules.   There need to be a law of contracts.   There need to be standards, so that competitive advantage can’t be gained by endangering health, destroying the planet etc etc. There need to be ways of preventing the growth of monopolies.

Many people who are “anti-capitalist” operate essentially defensively.   They try to protect the shrinking parts of society which are still (at least to some degree) outside of the market system (ie public services, state benefits, wildernesses, public spaces), and the share of the communal cake that goes into these.  This is important, but it’s not very radical.  It doesn’t really address the problems caused by the capitalist machine itself.   Most of us find the intricacies of the machine itself rather dull, but it’s that we need to be looking at.

And it seems to me the way forward lies not in abandoning the whole idea of markets, but by recognising that society does (and must) make the rules by which the market game is played, and then looking carefully at what the rules should be, and changing them so that they create incentives from which society will actually benefit, rather than incentives for dangerous and anti-social behaviour.

A very small example of the kinds of change that could be made is the ‘Tobin tax’ or ‘Robin Hood tax’ (which has been advocated recently by among others Bill Gates and the Archbishop of Canterbury).  This is a tax on financial transactions (originally, it was proposed just as a tax on foreign exchange transactions, but it could be applied to transactions such as trading in shares).  This addresses a very serious problem with capitalism as it now stands.   Large parts of our economy are dedicated not to producing useful good and services (the real economy), but to betting on the performance of the rest of the economy.   Many of our brightest citizens are wholly given over to this activity, creating a parallel house of cards economy which creates nothing, but uses the real economy as its plaything.   (I heard a bright young speculator boasting recently on the radio that it made no difference to him whether the economic situation got better or worse: either way he could make money.)

A Tobin tax would create a disincentive to excessive speculation (if you buy and sell constantly all day, the tax would mount up, and eat away at your margins of profit).   It would also draw wealth back from the casino of speculation into the real economy that produces goods and services.

(In modern post-Thatcher political discourse, a distinction tends to be made between the public and private sector, with the former seen as a drain on the latter.  Perhaps a more useful distinction would be between the useful productive economy – which includes public and private elements – and the parasitic casino.)

I’m not saying this tax would solve everything, far from it, but it does seem to me an example of the way in which rules can be changed.    There are lots of other possibilities.  (Incentivising mutuals and co-operatives?  Tougher anti-monopoly laws to prevent giant corporations such as the Murdoch empire gaining too much power?).  My point is that we can be as ‘anti-capitalist’ as we like, but ultimately, if we don’t want capitalism as it stands, we need to figure out, in detail, a different framework within which economic activity can take place.  Simply ‘defending public services’ is not enough.


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