Can Capitalism really be ethical?
A lot of people certainly seem to think so at the moment. As the IMF calls for a more inclusive form of Global capitalism, the Governor of the Bank of England recently called for the City Banks to rediscover a spirit of social obligation to the wider society in which they exist. David Cameron hit the headlines a couple of years ago when he promised to make Capitalism ‘work for everyone’, and Ed Miliband said something very similar when he set out the ways in which he disagreed with his Marxist father.
The promise that capitalism can work for the greater good isn’t one to be dismissed glibly. As part of my job, I spend quite a bit of time looking into the various Corporate Responsibility initiatives of some of the biggest corporations in the world, and some of the projects currently being undertaken are truly astounding. Did you know, for example, that the bank Standard Chartered has committed to raising $100 million by 2020 for a programme called Seeing is Believing that they set up with the aim of eradicating preventable blindness in developing countries? Or that Microsoft donates almost $900 million a year in cash and software to non-profits around the world? That companies driven by capitalist interests can do good is beyond dispute. The question in my mind is whether capitalism, as a system, can be trusted to foster a more equitable society.
In reality, my instinct tells me that it can’t. Of all the explanations of why that is, one of the simplest elucidations that I’ve come across is given by the theologian John Milbank in his enormous work Theology and Social Theory. Milbank argues that:
The balance of supply and demand alone is supposed to generate equivalence, but in practice this means that those who are richer and more powerful will only exchange under conditions where they can extract some marginal advantage in the form of profit.
If every exchange is unequally weighted in favour of the more powerful, and if the accumulation of capital is itself the accumulation of a form of power, then Milbank argues that wealth will inevitably accumulate at one end of society. The rich will continue to extract more and more from every exchange, while the poor, forced to accept an unfavourable rate of exchange by the coercive power of necessity, will become relatively poorer as the wealth gap grows.
The argument of the now infamous Fench economist Thomas Pikkety takes a slightly different, and perhaps slightly more rigorous line. Where Milbank pontificates from an armchair, Pikkety actually looks at some statistics. But their conclusions are the same. If the returns on capital really do outstrip the returns on wage growth, then, Pikkety argues, capitalism inevitably remains a system of ogliarchy in which wealth disparity is forever destined to grow – saving for the intervention of another catestrophic war or moment of revolution.
I’m not entirely sure why we’re surprised. Capitalism is a reliable system, not because it creates a particularly stable siciety, or because it looks after the interests of all, but because it rests on that most reliable of all human instincts – self-interest. The pursuit of personal gain, inevitably at the expense of others, is the founding doctrine of capitalism. It’s right there a the beginning, woven into the writings of Adam Smith.
It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantages.
Capitalism rests on the notion that a baker would want me to source my bread from her, rather than from someone else. I appeal to her self-interest, rather than her compassion, in order to get the best deal for myself.
Of course, Smith famously believed that market forces would balance themselves out, as though guided by an invisible hand. He believed that anyone acting in their own interest will naturally come to a position that is also in the interests of their society. But Smith lived in a world of localised communities – a world yet to be dominated by the global, state-less, corporate behemoth. A small community offers enormous checks against an “excess” of self-interest. If I rip-off the butcher, the baker will refuse to do business with me. If I exploit my employees, the community will ostracise me. In a globalised world, with a huge surplus workforce desperate for employment, and companies big enough to hide practices that they don’t want to see the light, there are few inherent balances against the excesses of self-interest. Smith’s invisible hand just doesn’t exist.
The thing is, as much as I dislike a system of inherent inequality founded on cut-throat competition and selfish ambition, I can’t think of a better one. Capitalism works because it operates in the real world, not a dreamworld where taxi’s run on love and good-will. If there’s one thing that characterises the human race, it’s not collective strength in the face of adversity or any of the things that Hollywood blockbusters would have us believe. It’s self-preservation and self-promotion. Global Capitalism might create wage slaves in developing companies, destroy native habitats and exploits resources (literally) like there’s no tomorrow to worry about, but there’s a limited amount that the Western world is willing to do about it. While we care, sometimes passionately, there’s very few of us (and I include myself in this) who would be prepared to suffer the steps necessary to realise a world that was truly and sustainably equal.
Because terrible though it’s excesses can be, the incentive of the free market also drives the sort of innovations that mean cancer survival rates are currently double what they were thirty years ago. It is capitalism that has created the drugs and treatments that offer hope to the millions suffering from HIV in the developing world; that has given us technology that we so take for granted; that has improved infrastructure and services beyond anything that Adam Smith could have dreamed about. As a good friend of mine once said, “I dislike capitalism, but I like dental anaesthetics more.” Competition drives innovation and progress in a way that no other system can match.
There are two temptations when it comes to scrutinising systems like Capitalism. One is to attempt to undermine the entire system, and advocate some utopian alternative. But in a world that inevitably lends itself to the pursuit of self interest, this is a foolhardy enterprise. A system which assumes the pursuit of self-interest is surely less likely to be caught out by its inevitable expression, and better arranged to take advantage of it. The other temptation is of course to accept the structures as given, focus on the benefits, and turn a blind eye to the consequences (or even deny they exist altogether).
The reality is that we inevitably inhabit a system defined by selfish interests. Individuals might be capable of great acts of charity, generosity and kindness, but these cannot be assumed. That’s why those who advocate cutting taxes so as to allow greater freedom to donate charitably are living in a dreamworld.
If we inevitably inhabit a system founded on self-interest, then we must inevitably operate within such a system. There can be no sudden rolling out of measures that fatally undermine the free market or that endanger the innovation that comes with competition. But that doesn’t mean the state can’t play the role of Smith’s invisible hand – turning the self interest of the individual to the benefit of all.
Sometimes that will mean regulation, such as the imposing of a national minimum wage linked the basic cost of living. Sometimes that will mean incentivising socially responsible behaviour and encouraging initiatives around corporate responsibility, whether through tax breaks or public commendation. And sometimes it will mean playing dirty, to bring low companies that accumulate too much power and influence, or that seek to stifle competition.
Some might argue that what I’ve described would entail a system very like the one we have at the moment. And to an extent they’d be right. But a government that understands its role to be one that lies in tension with the demands of big businesses, that sees itself as tasked with the responsibility of negating the excesses of capitalism – this is something we’re fast moving away from. The current government is one of deregulation; of big society and a small state. It is a government that is not only terrified of being seen to interfere in the free market, but that is actively encouraging the encroachment of neo-liberal structures on our last remaining publicly-owned services.
As the state shrinks, it might well be that the economy grows. But so does the power and influence of self-interested capitalists. And in this globalised economy, where the natural checks and balances against self-interest are minimal, it is surely foolhardy to advocate a system devoid of regulatory power. In this fallen and broken world, just governance lies, not in laissez-faire politics, but in negotiating a tension between the interests of the state and the interests of big business.
You might come to this point and wonder where Augustine fits into this. But the reality is he informs the entire worldview. It is Augustine’s political realism that identifies love of self as the fundamental basis of what he calls the ‘earthly city’. It is Augustine who identifies a fundamental tension between the duty of the legislature to the state and to the interests of the individual. And it is Augustine who understands a key role of the state to be the incentivisation of peace over the human predisposition to conflict, in much the same way as I have suggested the state has a duty to incentivise socially responsible activity.
Because at the end of the day, Standard Chartered is trying to eradicate blindness in third world markets because that is where 95% of its customers are based. Microsoft donates software to non-profits because it reinforces their dominance over Apple in the private and charitable sectors.
But that doesn’t stop these measures being great things to do.
Everyone tries to claim Augustine as one of there own. Catholics and Protestants fight over where his allegiances would lie, were he alive today. To try and speculate on what he might think about Capitalism would be a ridiculous piece of self-centred hubris that only the foolish would attempt.
But stuff it, I think he probably would agree with me. I don’t think he’d have much time for the current government, with their easy capitulation to the demands of The City and big business, but neither do I think he’d buy into the notion that a genuine working alternative to a system based on the love of self is possible in a fallen and broken world. The best we can do is to elect a government committed to negating the excesses of self-interest that inevitably arise when operating within the Capitalist system.
All of which means that when it comes to election day on May 7th 2015, you should cast your vote for the only party committed to treading the careful balancing act that is required to even begin to talk about an “ethical” capitalism.
Because that’s what Augustine would do.
Probably.