Left to its own devices, raw unmanaged capitalism produces some very unpleasant outcomes. It has a nasty tendency to concentrate power and wealth in the hands of a few and it will trash the environment without a second thought if there is a profit for those doing the wrecking.
This was seen most clearly in the first half of the 19th century when capitalism made a section of British society extraordinarily rich and powerful. But it also resulted in filthy rivers, horribly polluted air and dreadful slum conditions where life expectancy was dangerously low. It also resulted in some wild swings between boom and bust, as markets lurched between periods of rapid growth and sudden periods of financial collapse when traders panicked.
Transition to regulated capitalism
That period of extreme out-of-control capitalism was relatively short-lived. National governments began to act to try and limit the downsides. Laws were brought in to limit child labour. Taxes were raised to install sewage systems. Education was provided for an increasingly wide circle of people, providing skills and talents that brought increased incomes. Councils built good quality housing for the many and health care was improved and made affordable. At the same time, trade unions succeeded in driving up wages and improving working conditions as workers learned the advantage of acting in their collective best interests, rather than competing against each other to drive down wages.
Thirty glorious years
Eventually, governments learned how to manage national economies to even out the periods of wild boom and bust. We entered a period of guided capitalism or, more accurately, the era of the mixed economy, when the creative advantages of individual enterprise were accompanied by a widespread acceptance of the need for the state to take collective action on behalf of the community.
The French call that period the trente glorieuses. The thirty years between 1945 and 1975 saw an astonishing period of success as the lived experience of ordinary working people across most of Europe and North America got massively better. People could rely on work being available in factories and offices and on systems being there to support them whenever anything went wrong.
Challenges amid the prosperity
There were, of course, problems during this period. Some factories and mines provided hard and dangerous work. Profligate burning of fossil fuels was relentlessly building up problems in our atmosphere. Much of the rest of the world was cynically exploited as a source of raw materials and was powerless to resist the market advantages and the mass-produced weapons available to the wealthy and privileged countries. Living standards across much of the planet were desperately low in the post second world war years. But life in the more stable and affluent West went through a period of relative stability and security.
A dangerous sense of loss
When they look back on that era, many of the people who lived through it see a stark contrast with the way life works now. What changed was that capitalism went global and, as it did so, it cut loose from many of the controls that were exercised on it by national governments. We have been moving relentlessly towards an er that has much more in common with early extreme naked capitalism than the managed and controlled version.
We are living in a time when a few very wealthy individuals are getting richer very rapidly and no national government has the ability to enforce a wider distribution of wealth. The global capitalism that we now have is every bit as strong a creative force as the early version and it has succeeded in bringing employment and improved living standards to billions of people, particularly in South East Asia. Yet it has done this at a price.
The environmental and social costs of untrammelled global capitalism
The problems of individual self-interest clashing with the needs of the collective have returned, but on a larger and much more dangerous scale. Instead of polluting individual rivers with the filth from badly managed factories in the north of England, we are seeing the entire planet polluted by waste plastic products, which are cheap in money terms, but which come with a huge environmental cost. Fossil fuels are being burned in ever-increasing quantities when every honest scientist is telling us that we are destabilising the entire atmosphere of the planet. Wildlife and wild places are being relentlessly wiped out as rainforests are cut down to make a profit for a few.
Consequences: inequality and insecurity
As the downsides of extreme, unmanaged capitalism become increasingly problematic, lifestyles for many have become much more insecure. Those capable of providing the skills needed by the increasingly wealthy elite can sustain a decent standard of living. But those that can’t need the support of their government and services become stretched to breaking point. It is no longer possible to tax the footloose global elite sufficiently to provide a reliable safety net for the poor.
Follow the money – if you can
The very wealthy have moved their money offshore where it has been hidden in tax havens. Their wealth is sequestered in jurisdictions with lax financial regulations and secrecy laws such as the Cayman Islands, Switzerland, or certain Caribbean nations. It is moved about via crypto currency exchanges that consume enormous quantities of energy.
That money is immune from taxation and whenever any government attempts to exercise control over it a great deal of funding gets deployed to influence voters to undermine those efforts. The very wealthy are increasingly able to buy influence over elections and to live beyond the control of any one national government.
Citizens have become disillusioned with their own governments as they watch once proud communities get hollowed out, secure jobs disappear and services that they used to rely on cease to function effectively because there isn’t enough taxation income to pay for them.
Boom to bust – but who really pays the costs?
On top of all that, a nasty tendency for the global economy to lurch between boom and bust has returned. In 2008, the entire economic system was brought to the very brink of collapse because extreme free markets suddenly tipped into panic. They were only rescued by central banks and central governments providing truly astonishing quantities for free money for the wealthy. Then, those same leaders proceeded to tell their citizens that there was no such thing as a magic money tree and that millionshad to endure a long period of austerity to pay for a crisis they hadn’t caused. It is far from certain that the global system is in any state to survive another crash on a similar scale.
A need for global governance
There is only one realistic solution. Ways have to be found to create effective international management of global capitalism that resemble the effective methods used in the more successful post second world war period. It is not possible to have a global economy without effective global control and guidance of it. We cannot live on a planet that is subject to global environmental forces unless we have global mechanisms to control those forces.
Capitalism: towards a global ideological shift
Until we develop truly effective international management of international capitalism, the problems described here will continue. Raw capitalism is very creative but it eats itself, as it places too much power in the hands of individuals who have little incentive to consider the consequences of their actions for the rest of us. Life will continue to become more insecure, more unequal and less sustainable until we learn the lessons and start to properly manage their power.
International capitalism requires global government. We are a very long way off achieving that and will not make progress until there is a serious ideological shift in favour of internationalism. The needs of the many must outweigh the self-interest of the few. Britain could make a start by rejoining the EU – a flawed international organisation, but one that is large enough to have some chance of standing up to the extremes of international finance capital.
