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Article: Capitalism is not ‘bad, bad, bad’

Letter published in Resurgence magazine, January 2006

What’s in a name? Either both you and John Whitmore are genuinely against the private ownership of capital – in which case, by the way, you should oppose, not support the efforts of the Grameen Bank – or you are choosing to somehow redefine capitalism and then blame it for the appalling injustices, abuses of power and environmental vandalism faced by the modern world. Unfortunately, as such abuses also occur in dictatorships, communist states, feudalist states – in fact every system involving a high degree of centralised power you can think of – such an argument hardly seems credible.

John Whitmore’s article is particularly frustrating because you have only to look at the “opposing” forces for good that he identifies to see both that he does appreciate the nature of the work that must be done to improve matters and that capitalism is not the issue. He mentions the advocate of Total Corporate Responsibility, Frank Dixon (who argues that companies should adopt TCR to increase their profits), Paul Hawken, who suggests not an end to capitalism but ‘Natural Capitalism’, a refinement of its practice, and he cites the Grameen Bank which is, well…a bank. The only true anti-capitalist Mr Whitmore names is one who inspired a system which sounded good but which, taking an average of estimates, executed some 20 million of its own citizens between 1924 and 1953: Marx.

People and power, technology and responsibility are the issues here, not the system they operate under. Modern practitioners like Ricardo Semler and Muhammad Yunus know this, as do modern writers like Joel Bakan (author of the book and film “The Corporation”) and Dan Plesch (author of the document behind the Impeach Blair campaign, “A Case to Answer” and of “The Beauty Queen’s Guide to World Peace”). Neither of these respected writers appears to mention the ‘c’ word in their texts, let alone their indexes, whilst Richard Heinberg, a leading author on Peak Oil, argues strongly that, far from driving transformations, capitalism and Marxism arose out of dramatic shifts in technology and energy supply. What about older writers? In “Good Work”, EF Schumacher quotes Marx with a reverence that is quite startling today, yet even he was far from convinced that capitalism was the problem: “I myself fear it is industrialism, whatever the social form.” Schumacher’s chief concern, quite rightly, was not the system, but the scale of the organisations and technologies within it.

Is this failure to name the cause of our problems accurately something we should care about? We all appear to agree on what the problems are, so does it matter if we are a bit woolly about what we blame them on? I think it matters enormously, for at least three key reasons. To describe capitalism as “bad, bad, bad” and misleadingly identify it as the cause of modern ills, threatens to undermine the credibility of the valid and important underlying arguments of John Whitmore and others. Secondly, it unnecessarily alienates many of those who might otherwise be sympathetic to those arguments. Last but by no means least, suggesting that we have to adopt an alternative social system that has not even been thought up yet encourages a convenient defeatism amongst liberal Resurgence readers like me, who want to see an end to the world’s problems but would be happier if this didn’t mean having to make any real sacrifices today, thank you.

If capitalism is not the problem, what is? Schumacher got it right: scale is the real villain – or rather, the inhuman scale of international corporations and their freedom from ordinary human pressures to act responsibly. Thanks largely to cheap fossil fuels and its associated technologies, modern companies are able to displace the negative side effects of their operations to far away countries, or far into the future, so hiding unpalatable truths from us, their customers and investors. They are encouraged to do this by a system which rewards shareholders for focusing purely on short-term profit figures, safe in the knowledge that their liability is limited to their original investment. Thus, in the unlikely event that the company should ever be called to account, none of the executives involved would suffer (they would probably have been acting quite properly in the shareholders’ financial interests), whilst the shareholders’ liability would be strictly limited – regardless of whether or not they had been drawing healthy dividends for years.

The ‘heads they win everything, tails they lose a little’ basis on which modern corporations have been built has created to world in which each individual serving a corporation is rewarded or punished depending upon how well he or she performs in relation to the pursuance of short term profit, despite the fact that, collectively, these efforts take all of us in directions that none of us – not even the board directors – personally wants to go. True, some may care less than others, but not even the most enthusiastic shopping mall developer wants every town in the world to look the same, nor does any asset stripper want to pollute or destroy a landscape or a people. Most employees, meanwhile, just want to support their families and have a reasonable lifestyle. Some are pained by the consequences of their employer’s actions but, rightly, in most cases, see their chances of changing attitudes as negligible. So the world’s most sophisticated resources and highly trained people are devoted to creating a world that none of us wants, but which almost everyone feels too powerless or too indifferent to do anything about. We truly have becomes slaves to the machine.

How can we break free? Many are pushing in the right direction, especially, I believe, those advocating a more far-sighted capitalism, such as Frank Dixon, Dan Plesch and, not least in his latest book, Jonathon Porritt. Legal challenges to corporate abuses, too, are a vital front on which, for a change, we can cheer the upside of our “compensation culture” and its henchmen (why should the devil have all the best lawyers?). However my own feeling, for what it is worth, is that the key to getting the machine working for us is the progressive erosion of limited liability, so giving real teeth to the drive for sustainable corporate practice. Much more practical that it at first sounds, the lead for helping “unlimited” companies succeed could come from the major ethical investment funds. They, of course, would have to be phenomenally careful when choosing which companies to back. More to the point, if the greater, or even unlimited, liability for a company’s debts could be passed down to the fund’s investors, each investor, too, would take a very great interest in the activities of the company in which, indirectly, he or she had invested.

In this way, the millions of us in the west who, through savings and pension funds, invest in the world’s large corporations – fuelling the machines to which we are enslaved – would be transformed from what Schumacher likened to 18th century absentee landlords, happily in denial over our tenants’ suffering, into active stakeholders. Conscious of the financial damage it could inflict upon us, we and our fund trustees would quickly sell stocks in companies seen to be acting irresponsibly, driving their share price down, forcing their executives to mend their ways. Sometimes, companies would fail anyway, at which point we might lose out and have to make some of those real sacrifices – but do you want a fairer world or not?

Unlike its realistic alternatives, capitalism is not inherently anti-democratic. Furthermore, the democracy and rights to free speech that exist in most westernised capitalist states, however flawed they may be, offer practical paths through which to address the world justice and environmental issues that so desperately need our support. As such, capitalism is the best system we have. Our duty is not to run it down, but to push for it to be run as it should be: in service to our planet and its people.

Yours etc.

Copyright Michael Taite

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