(This post is a little scrappy, but because it’s meant to open a debate rather than express my full and final opinion, I think that’s okay.)
It seems to me that the term ‘capitalism’ has become so vague and slippery it’s almost like the term ‘God’, or as slippery as an eel!
There are a couple of technical economic definitions “private ownership of the means of production” – but actually, there are alternatives to what is generally understood as capitalism that have private ownership of the means of production yet aren’t recognisably or functionally capitalist, and there’s a more technical economic definition as ‘a system of giving financial and legal priority to the owners of capital over other types of economic contributions to surplus value’, which is fine, except that that isn’t the way most people use or understand the word.
There’s also a gob-splutteringly frustratingly crap implicit definition of ‘capitalism,’ which was the sense used in the Bristol Festival of Economics opening panel debate, something like “capitalism is the status quo system, the status quo system has got us this far relatively better than contemporary alternatives, therefore the capitalist system works to some extent, therefore capitalism must be good in itself and just have a few hiccups”. Ur no, go back to logic class 101, you have just committed the most gross, crass circularity! Actually this logic doesn’t even really define what capitalism is, let alone prove its point that it is basically a good thing.
In reality, over the period such people are usually talking about, there have been a great variety of different meanings of ‘capitalism’ in practice, both simultaneous diversity and changing over time: In at least some of the early Industrialist’s usage, ‘capitalism’ was a syndrome of character virtues- industriousness, frugality, enterprising innovation and conscious careful risk-taking, investing in public works, being prudent and responsible with long-term asset management. Thus to Weber there was a connection between the Protestant Ethic and the Spirit of Capitalism. Obviously, the conventional implicit definition or sense of what ‘capitalism’ is nowadays is almost diametrically opposed to what it meant to the early Industrialists. So it is stupidly unfair to claim the benefits from the early phase of Industrialisation as attributable to the current status quo version of so-called ‘capitalism.
Generally, it means so many different things to different people, I don’t think it’s a useful term anymore without qualification or specific definitions attached, but we’re hardly at the stage of a consensus understanding of even the broad categories of different interpretations and bits of ‘capitalism’ enough to have a sensible debate.
In my experience, ‘capitalism’ seems to be referred to in vitriolic superficial flame-wars in online discussions, or when the mainstream media want to quickly and efficiently stereotype, discredit and dismiss any critics of the economic status quo, as in “Anti-Capitalists today clashed with riot police…”, hence no need to report specifically what they said their protest was about.
In the typical rightwing argument, anything other than ‘capitalism’ as currently practiced must mean soviet style state socialism, and we all know how badly that went. Nevermind that it wasn’t really self-consistently ‘socialist’ in principle or in practice, and nevermind that it was the state or centrally planned aspect that made it go so horribly wrong, rather than the idea of designing some kind of economic system to serve society as a whole instead of designing it to serve entrenched private vested interests, let’s just let that argument go and move on. I accept that overall, both for better and partly for worse, capitalism as conventionally practiced has functioned relatively better in terms of people’s needs and expectations than ‘socialism’ as conventionally understood by the mainstream and as practiced in the countries which claimed to be doing it. So let’s accept that the vague mixture called ‘capitalism’ has at least some good bits, and now let’s try to be more specific what are the problems or ‘areas of room for improvement’!
I propose splitting up The Beast, the great mythical mysterious It, into its constituent ideas or structural principles, so we can get people debating the bits rather than the overly big and muddled uber-term ‘Capitalism’, e.g.:
Private ownership of the means of production – not necessarily a problem in itself, unless it’s excessively concentrated and polarized (possibility of building in mechanisms so the next system intrinsically tends to allocate resources in accordance with http://en.wikipedia.org/wiki/Subsidiarity?)
Free market – ‘freedom’ in what sense? freedom to work for a personal and family livelihood (and optionally, for the common good as well) within a fundamental moral framework, or freedom to exploit and oppress others as far as the rules will stretch? Freedom as a right to free-ride on society without contributing a fair share in taxes? Free as in merely free of state interference, or free as in reasonably approximately equal negotiating power in economic interactions, with reasonable alternatives available if the deal is not sufficiently win-win for all sides?
Entrepreneurialism – high cultural value and economic incentives attributed to entrepreneurial innovation and creativity – probably at least partially a good thing?
Capital owners being considered to have first right over surplus value, regardless of the real proportion of value they have contributed to making that surplus – let’s call this the priority of capital for short. (Versus: Labour theory of surplus value, or synthesis of the reasonable parts of both concerns in Mutualism.)
The doctrine of shareholder value (or ‘shareholder value fundamentalism’) – implies an alienation of moral responsibility from the person to the corporation, from the corporation to the State, and from the State to the electorate, but electorate has too dispersed control for it to feel worthwhile for individuals to invest the energy in investigating and making careful, socially responsible decisions, so result is a complete circle of alienation of responsibility.
*Short-term* monetary profit is higher priority than long-term optimum overall outcome
The false) sense of equivalence of *monetary* economy with ‘the economy’, and thus unrealistic allocation of resources.
Lending with interest – original function was early industrialisation required sufficient concentration of capital to enable industrial development and hence improvements on average in standards of living and life expectancy. However, interest as a mechanism for concentrating capital has no integral ‘enough’ mechanism. Also, the concentration of capital resources by private ownership is inconsistent with democracy, because it tends towards regulatory capture and exploitative control of access to capital.
Interest also tends to incentivise short-term over long-term benefits (versus: demurrage)
Falsely reified dichotomy between private and public economic spheres.
Intellectual property rights – in principle, intellectual property rights (despite the name) are contrary to one of the founding principles of capitalism – free flow of information
When what a society’s economy is ‘producing’ is mostly information (and technology), if you maintain strict ‘intellectual property rights’ then that is in practice seriously compromising the free flow of information and development.
I am not proposing each and every structural element here as potential complete definitions rather than constituent parts. Some of them necessarily imply some others, but not all, e.g.
Lending with interest – if it’s the only form of credit in a system it’s problematic, because it necessarily implies short-termism in investment and development decisions, because of the discount rate. However, that is not necessary, conventional fiat money bearing interest could also exist counter-balanced by mutual credit money, possibly with demurrage to add a positive incentive for long-term investment, and-or co-operative joint venture finance (or ‘Musharakah’) as an alternative to lending with interest, in a complimentary sort of competition.
Private ownership if applied absolutely and without limits does conflict with mutualism (as an alternative to the priority of capital), but if it’s interpreted and designed in a form in accordance with subsidiarity, it doesn’t have to.
Free markets do not necessarily require the doctrine of shareholder value and alienation of moral responsibility, but that depends on the interpretation of ‘freedom’
Another issue with post-industrial capitalism is the rise of absentee shareholder owners who take no responsibility at AGMs and Directors with limited liability -no-one ends up taking any responsibility for anything other than the bottom line *that year*! i.e. the problems with limited liability PLCs
The assumption that of necessity prosperity requires poverty somewhere else, because it’s a zero-sum game – the ‘struggle for survival’ pseudo-evolutionary rhetoric.
I don’t think this is necessarily the case for any stage or form of capitalism overall, but especially in a post-industrial capitalism, zero-sum economics does not apply
The way economic activities become more than zero-sum or win/lose is by collaboration and co-operation -which conflicts with the current practice of so-called intellectual ‘property rights’.