Paper by RC for discussion on 10th April 2008
(see also write-up of group discussion)

This question troubles every socialist from time to time. What if capitalism could be reformed in order to make it far more acceptable to the left? Perhaps as the founder of the German Social Democratic party Eduard Bernstein believed, socialism shouldn’t be seen as a goal or an end in itself, rather that capitalism could be sufficiently reformed to bring about real social change rather than waiting for a socialist utopia. The question therefore seems to be: is capitalism inherently bad in itself; or is it bad because people have been used a perfectly good economic system for exploitative ends? Can it be reformed or do we need a new social, political and economic system?

Firstly, we need to be clear what capitalism actually is. A definition from Dictionary.com:

“an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by privateindividuals or corporations, esp. as contrasted to cooperatively or state-owned means of wealth.[my emphasis]”

The key to understanding capitalism then, is that no matter how social the enterprise, it is fundamentally a private enterprise. A Public Limited Company can be owned by anyone, just not everyone.

Capitalism is good

Adam Smith in his famous book An Inquiry into the Nature and Causes of the Wealth of Nations in 1776 argued that this privatisation of trade was a good thing. Human self-interest expressed through a free market had led to huge economic development, he argued, and made a stark contrast between the capitalist societies of Western Europe of his day with more ‘primitive’ societies to make his point:

“Among the savage nations of hunters and fishers, every individual who is able to work, is more or less employed in useful labour, and endeavours to provide, as well as he can, the necessaries and conveniences of life, for himself, or as such his family or tribe as are either too old, or too young, or too infirm to go hunting and fishing. Such nations, however are so miserably poor, that from mere want they are frequently reduced, or, at least, think themselves reduced, to the necessity sometimes of directly destroying, and sometimes of abandoning their infants, their old people, and those afflicted with lingering diseases, to perish with hunger, or to be devoured by wild beasts.” I.I.4 An Inquiry into the Nature and Causes of the Wealth of Nations

Smith is therefore developing the idea that an economy which can create an abundance of surplus wealth for a rich ruling class is also much more capable of providing for the elderly, sick and disabled. From this angle it seems that great political reformers like Thomas Paine and others were able create the idea of a welfare state and develop it into the nineteenth century and onwards partly because the abundant wealth of capitalist societies had given rise to such possibility.

Therefore for us on the left it is difficult to fault the historical rise of capitalism, as it broke down social hierarchy and paved the way for the possibility of a welfare state.

Bad capitalism

However, Karl Marx, who also saw the rise of capitalism as a great development also realised that there were inherent flaws in an economic system which allowed the private ownership of ‘the means of production’ and the private ownership of wealth.

Marx realised that it wasn’t just the private ownership of production and wealth that was the problem in that some sections of society would be richer than others, but that the employer would seek to maximise the amount of labour from the employee whilst paying the minimum amount of wages for that labour. This is known as the theory of surplus value.

The question arises then – what happens if a good employer sets out to pay high wages in return for a say a 35 hour week. Will the business make a profit? Can this be a model for a whole capitalist economy in which shareholders will demand the highest possible returns?

Contemporary Ethical Capitalism

Fairtrade: should be embraced by all socialists morally but such ethical trading only fulfils what most of would consider to be basic social needs:

Fairtrade is about better prices, decent working conditions, local sustainability, and fair terms of trade for farmers and workers in the developing world. By requiring companies to pay sustainable prices (which must never fall lower than the market price), Fairtrade addresses the injustices of conventional trade, which traditionally discriminates against the poorest, weakest producers. It enables them to improve their position and have more control over their lives.

Co-operative: Co-ops in the west do provide a more socially responsible alternative to capitalism. The question with co-operative organisations like the Co-op bank is that perhaps they don’t go far enough? Could they be transformed to include co-operation between staff and the wider community in a more radical way? Could this become a model?

The Third Way – Social Capitalism

Parties of the left in the west including the Labour party have embraced the idea that capitalism can be managed in a ‘good way’ ‘for the many and not just the few’ as Tony Blair once said.

At a recent meeting between Gordon Brown and Nicholas Sarkozy at the Emirates stadium hosted by Arsenal manager Arsene Wenger commented:

"I don't feel any more, in the modern world, that there is a big difference between socialist or right (wing).There is only one way to lead the world and that is to be as social as you can by surviving economically."

Conclusion

Can there be ‘good capitalism’ when as the 18th century philosopher Immanuel Kant stated, the difference between an object and a person is that an object is a means to an end whilst a person is an end in themselves. While capitalists have to cut jobs, lower wages and lengthen working hours to make a profit, can capitalism ever actually be ‘good’?

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