There’s a problem with capitalism: it doesn’t quite work. No economic system does, of course. The other great hope, communism, doesn’t have much to show for itself either.
Capitalism, however, has promised us so much. Enormous wealth. Security. Abundance for all.
Economists and libertarians have long placed their faith in free markets but seldom have they had the opportunity to see whether or not the theory works in practice. The US might be capitalism’s shining light, but since the Great Depression it hasn’t really been all that capitalistic. Social Security, Medicare, Medicaid, welfare, subsidised farming, and a political system that is the sphere of only the most privileged – sometimes it seems like the country is downright socialist.
In the last decade, however, that socialism has been steadily eroded. A deregulated banking industry, tax breaks for the rich, outsourcing of labour jobs, a tightening of immigration laws for skilled workers, and an increasingly corporatised political system have undercut the socialist safety net that has helped keep living standards high in what was once the greatest economic power on Earth.
Instead, America has turned its back on the collective good and emphasised more than ever individual responsibility, the every-man-for-himself mentality endorsed by the Brothers Koch, and the trickle-down religiosity that supposedly justifies the rich getting richer while the poor get poorer. The top 400 Americans today have more wealth than half of all Americans combined. From 1983 to 2009, 80 percent of US wealth gains went to the richest 5 percent of people. Forty percent of the total wealth gain went to the richest 1 percent of Americans.
The problem with with unfettered capitalism is that it encourages the worst of the human’s base instincts. We are social animals, but, if we think no-one is looking, we are more than happy to act selfishly. In a society for which the main economic principle is based on competition, we are encouraged to act in the self interest – ostensibly for the greater good. “Capitalism,” as Alain de Botton has said, “is committed to fracturing and dissolving our communal ties.”
And that’s where it fails us.
Humans are a cooperative species. Millions of years of evolution have made us so. Since the homo sapien emerged 200,000 years ago, he has had to figure out a way to stave off hungry lions, defeat the elements, get shelter, and stay well fed. That’s simply not possible alone. We humans are weak. We’re slow. We are prone to sickness. Without air-conditioning, we can’t even get a good night’s sleep.
Somehow, however, we have come to dominate the planet. And it wasn’t through trickle-down economics. Capitalism has predominated as our main economic principle for only 10,000 years, since farming was introduced. Sounds like a long time, but it’s not. It’s pathetic. We’ve been around for 200,000 years. Even if we managed to survive as a species for another 10,000 years – and, with climate change, resource scarcity, and over-population, that seems unlikely – our record as capitalist farmers would pale compared to our success as hunter-gatherer collectivists.
If somehow we do manage to eke out another 1,000 decades on this planet, that gives capitalism 10 percent the lifespan of hunter-gatherers, who lived (and in some areas still live) sustainably from the land and shared responsibility for everything: food, child-rearing, shelter, and protection.
The common riposte to this point is that life for hunter-gatherers was “nasty, brutish, and short,” as Thomas Hobbes would have us believe. In his book Guns, Germs, and Steel, Jared Diamond makes short shrift of that argument:
In reality, only for today’s affluent First World citizens, who don’t actually do the work of raising food themselves, does food production (by remote agribusiness) mean less physical work, more comfort, freedom from starvation, and a longer expected lifetime. Most peasant farmers and herders, who constitute the great majority of the world’s actual food producers, aren’t necessarily better off than hunter-gatherers. Time budget studies show that they may spend more rather than fewer hours per day at work than hunter-gatherers do. Archaeologists have demonstrated that the first farmers in many areas were smaller and less well nourished, suffered from more serious diseases, and died on the average at a younger age than the hunter-gatherers they replaced. If those first farmers could have foreseen the consequences of adopting food production, they might not have opted to do so.
Then people will talk about the wonders of modern medicine and technology, fruits of capitalism that make our lives better. That is true, to an extent. But the 1 billion people living in hunger might take some convincing.
In The Belief Instinct, psychologist Jesse Bering argues that morality can be defined by acting in the group interest rather than in self interest. This version of morality would have been essential for survival among hunter-gatherer groups, and it explains why selfish behaviour is so instinctively frowned upon by so many. We have an in-built impulse for fairness. That’s why economic and status equality are two of the most important predictors in any society’s levels of happiness (a point also made by Dan Buettner in his book about the happiest places on Earth).
In the small groups in which our pre-farming ancestors lived (Dunbar’s number suggests a median of about 150; similar to that of tribes, neolithic farming villages, and basic units in armies), regulating this sense of fairness would have been straightforward. Everyone would know everyone, and, with everyone ‘looking’, selfishness would have to take a back seat.
We don’t enjoy that luxury in modern times. Our societies exist as heaving anonymous clumps with widely dispersed populations and a diluted sense of collective responsibility. Hence selfish behaviour. Hence the tragedy of the commons. Hence the failure of communism.
So the big question is, if capitalism isn’t working and communism has already failed, how should we organise our societies?
The answer is to fuse the best of capitalism – which has been very effective at generating wealth, but hopeless at distributing it – with the best of socialism, which capitalises on the best human instinct: cooperation.
The world’s population is too big and too dispersed to recreate the small-group dynamics under which the hunter-gatherers lived so successfully. So all we can do is create economic conditions that mimic hunter-gatherer principles – principles of shared responsibility – as best we can.
That means retaining the incentive-based structure of capitalism but building into it measures that protect the wider population. That means high taxes to ensure first-rate services, especially in education, health care, welfare, transport, and public facilities. It means fostering a sense of community at every level of society, instead of sectioning off the rich from the poor. It means shifting resources from ‘defence’ and punishment to prevention and rehabilitation.
There are, believe it or not, societies on this planet who exist in such ways. Some of them are in Scandinavia. These countries happen to be among the happiest, most peaceful, and most prosperous in the world. (Norway, Denmark, and Finland are consistently among the top five countries reporting the highest happiness levels; and Scandinavia is home to four of the 10 most peaceful countries in the world.)
It’s not a perfect solution, but it’s preferable to the current dominant system, which has landed us in our current bind (protests on Wall Street; recession; a tanking stock market; a jobs crisis; the world being uncomfortably close to economic collapse). And while there’s no turning back the clock to hunter-gatherer times, perhaps with socialised capitalism we’d at least stand a chance of delaying the embarrassment of our imminent self-destruction by a few thousand years. It’s either that, or we all learn to live off food stamps.
But wait – isn’t that communism?
