McCloskey and My Capitalism Confusion
from Peter Radford
Maybe it’s just me, but I am confused over this thing called capitalism. I have read that it is the great force that, somewhere back a couple of hundred years ago, suddenly unleashed a surge of wealth creation that has, like a huge tide, carried us all to heights of luxury previously unheard of. Perhaps that’s true. I am told that scientific advance, religious and political freedom, and the diminution of the conservative institutions that characterized society before that point were insufficient to spark such growth. No it was capitalism. The swiss army knife of socio-economic advance.
I mention this because I am, in my normal ham-fisted manner, trying to grapple with the so-called “structural unemployment” issue. This being the currently fashionable explanation for why US unemployment rates have been so resistant to improvement.
We are, apparently, stuck in one of the more destructive moments of what Schumpeter called creative destruction. The capitalists say tough. They say get used to it. Eventually we will all motor on to better and better things. So stop the whining.
But I like whining. Especially when I am yet to be convinced this is all true.
I am not going to fall into the trap of criticizing capitalism as totally corrupt or iniquitous. I agree with the general thesis that is has been agreeably beneficial for us all. For instance, I have to agree with McCloskey when she forces us to face the long run gains in wealth that the poor have experienced wherever innovation has been allowed to let rip. Innovation, that is, when coupled with greed. With personal greed providing the spark that spurs people to exploit innovation. The long run idea being that we as a society benefit from the relentless shift of resources from lower value uses towards higher value uses. That gain in value-in-use is what explains my comparative wealth when compared, say, with that of my grandmother who worked as a servant on the estate of an English aristocrat.
So, yes, I am much better off than my ancestors. And for this I am grateful. Well done all you innovating entrepreneurs.
But. I am not so sure I like all the consequences, some of which take the edge off those gains. There are two I dislike most. You may have a different list.
First is the most obvious. Apologists for capitalism invariably oversell its ability to solve problems. They make it sound as if capitalism is the solution to everything. This is absurd. For just as we skeptics should acknowledge the great wealth it seems to have created, the apologists should acknowledge the great number of things it hasn’t solved. Plus they should acknowledge the ancillary costs that come with it. I see no cure for cancer. Nor do I see a current solution to the environmental muck that those factories spew out. There seems to be a great deal of social cost associated with all that essential private gain. So, we are certainly better off, but we also have new costs to bear. Costs that often mitigate some of that gain, but which we are supposed to be happy to bear so the heroic entrepreneurs can run free and innovate to their happy hearts desire. And to their profit of course.
Second, and perhaps less obvious, is that the constant turmoil so well described by Schumpeter is more economic and less social. Wealth tends to stick. And that stickiness builds up. The result is that societies can congeal with the top tier then able to ensure that the destructive bit of capitalism passes them by. The wealthy get to run things either directly, as in the old days, or indirectly, as in contemporary American politics where money talks very loudly indeed. Unfortunately this means the two spheres mingle into a socio-economic melange and the constant churn of capitalism gets muted by the barriers of privilege and class continuity.
I think Schumpeter realized more than any current economist just how much the political, social, and economic spheres interact. They are not at all separable. We are faced with one giant complex jumble of relationships. When we try to tease out the so-called “purely economic” part, we come up with dumb and irrelevant analysis because we have left behind the essential context within which that economic part comes alive. It’s as if we have to kill the market in order to study its vitality. So too with capitalism. We take it out of context and we draw wrong conclusions. Those wrong conclusions can sometimes be dangerous. As in the relentless deregulation that contributed to the instability of our banks.
When I consider just how much America has changed since I arrived here – after leaving England precisely to escape its love of crusty social structures – I am left wondering just how creative all that destruction is. America seems to be fast ossifying. The energy of what I came to having been replaced by a more slow moving, quasi-class sediment, deposited across society. There is a definable upper class here. More so than ever. So where is that churn? Where is that risk of collapse that Schumpeter spoke so glowingly of?
Put this in context.
The Great Recession has scarred America. The prime movers of the errors that plunged us into the abyss are relatively unscathed. They are back making millions. They are still in control. They, as a group, seem undaunted by the experience. I am sure that within the group some re-strucucturing of the pecking order has taken place. But I see very few ex-Goldman Sachs bankers driving taxi cabs. In fact I see, and know of, none. The great crisis did not alter the social fabric one iota.
All that destruction ended up on the shoulders of those who experience capitalism second hand. They are the ones McCloskey says should be happy to tolerate the capitalists. They are the poor whose boat has been so generously lifted by the great capitalist tide. It is not for them to complain. They are lucky. After all it is not their hard work or effort that made all this possible. It is those capitalists. They did the heavy lifting. Workers merely work. And we all know they only do that up to the point at which the disutility of losing leisure matches the utility of earning a wage. After which they revert to their natural lazy and indolent state. Or unemployment.
So it is only right that the workers bear the brunt of the great changes afoot as the clever capitalists engage in a humungous gear change.
Hence structural unemployment.
It appears that our wise capitalists and financiers have learned that American workers are too expensive and not very well educated for the new things we need to do. This is, obviously, the worker’s own fault. So they are justifiably unemployed. They need to learn new tricks. And they need to do those new tricks for a lower wage. This is because there are hordes of cheap and apparently well educated workers elsewhere willing to catapult their own wealth by working all hours for less. This naturally excites the capitalists who can similarly catapult their own wealth beyond its current meager levels. But those American workers have to give up the notion of maintaining their living standards, at least until they get themselves a better education more fitting to the new wave of up-scale jobs about to be unleashed by all this creative destruction. Just don’t ask the capitalists to chip in for that education. You see, education is a private, not a public good. Workers benefit from a better education so they should pay for it. The capitalists will look after themselves thank you very much. So should the workers.
As we emerge from the crisis and ponder the lingering unemployment problem our capitalist friends have an important message: this is only the destructive bit. We can rest assured a new wave of creativity is rushing ashore to lift us all to riches beyond our wildest dreams.
This is where it gets a little sticky. For me at least. That onrushing wave looks a lot like a tsunami, with all the terrifying destructive power we are now all too well aware of. Even the apologists have to admit this wave looks a little different from the others. This should make a difference in our analysis.
This is because for all the enormous amount of talk there’s been, we really don’t have a lot of history with capitalism. As McCloskey says, it’s only been around for a couple of hundred years only. That’s not many generations. And Schumpeter was writing his glowing account several decades ago when we had even less history. His descriptions often sound like the naive wonderment of the young, before time chips away at that early awe. And time plays a big role. It’s one thing for me to acknowledge that I am much better off than my servant ancestors. It is another to live through one of those destructive phases. If the destructive phase is so long that it encompasses a person’s entire working life, then that person is entitled to wonder what all the fuss is about. They are entitled to wonder where all that creativity is. Gain over several generations, it turns out, can include a loss over one of those generations. It’s our bad luck to be the loser.
That’s pretty much where we’ve been. Wages in America have languished, not just through this crisis, but for three decades prior to that. The vaunted onrush of creativity hasn’t impelled the average worker forward for a while now. At least not here. Globally, maybe it has. Those newly minted Chinese middle classes are surely in the thrall of the greatness of capitalism. Chinese style naturally. But capitalism nevertheless.
Here. Not so much.
McCloskey makes a big deal about lecturing to us, in her maternal way, that we should not see creative destruction as a win-lose dichotomy. She suggests it is more a win-win-win-win-lose game. Yes there are losers. But the winners are so many more, that society as whole can tolerate them. They can be absorbed or ignored. Life is tough. This argument was written just before the implosion. Now it looks less assured. The problem being that there are too many losers this time. The destruction vastly outweighed the creation.
And that congealed top layer of society is untouched. So the destruction is asymmetrical and acute.
McCloskey wants us to believe the hype. She wants us to relax and wait for the next great leap forward. She says all this growth in wealth has been delivered by the unleashing of forces after greed became socially acceptable. Only we don’t call it greed. We call it capitalism. The wealth machine started rolling when dignity was conferred on greedy entrepreneurs. When they came in from their long held social outcast status. When societies recognized something she calls Bourgeois Dignity.
Maybe.
But what about worker dignity?
Or is that not important?
I think it is.
I am not going to fall into the trap of criticizing capitalism as totally corrupt or iniquitous. I agree with the general thesis that is has been agreeably beneficial for us all.
Who does he mean by “us”? For American Indians, capitalism has produced genocide pure and simple. Basic institutions of American Indian life such as the Potlatch or “Give Aways” were banned because the communalist and anti-capitalist values embodied in them were in direct conflict with the “social capital” and SSAs requisite for the expanded reproduction of capitalism. While parlor intellectuals play at being safely and profitably “progressive”, this system threatens the end of this planet and human history–for real this time.
The view expressed by this author reminds me of a poem by Bertolt Brecht:
Those who take the meat from the table,
demand sacrifice.
Those for whom the taxes are destined,
demand sacrifice.
Those who eat their fill, speak to the hungry,
of wonderful times to come.
Those who lead the country into the abyss,
call ruling too difficult,
for ordinary folk.”
Bertolt Brecht.
Capitalism is not the first system to claim it is making the world and everyone in it better off, in the long-run. Look at The Roman Empire, Feudalism, Roman Catholicism, Mercantilism, etc. Neither is capitalism unique in attempting to harness greed to gain economically. Look at what was done during the Crusades in the name of Holy Mother Church. And doing all this is not unique to the West. It happens with Islamic countries, in Communist and Imperial China, and in Tsarist and KGB Russia. The only significant question is whether capitalism is making the claim and carrying it out with more or less collateral damage than the other alternatives in history and existent today.
Maybe you are buying Niall Ferguson’s line without looking at it too closely? That “capitalism got us here” is based on not much more than the coincidence of capitalism with material prosperity over some of the earth over some of the last century. Look back, and you see that the ability to tap new energy sources – starting with coal and steam and working up from there – got us here (and this is not a simple process: to use tools effectively you have to have much more than the tool itself). Capitalism itself (whatever that is) has changed several times over the last 150 years. If the environmental scientists are right, the next trick will be preserving as much prosperity as possible while using less energy. Some further change – which some will no doubt call “capitalism” if it works for them.
Peter R makes it large. I’ll try to make it small:
“A coffee bean from Surinam in Doesburg, 1760″
Doesburg is a small city, located at the boards of the IJssel river, in he middle of the Netherlands. In a 1760 probate inventory of a grocer, I encountered – among a whole lot of other colonial or French, German and even Icelandic products – coffee from Surinam.
That’s capitalism at its best. And at its worst.
The habit of drinking coffee went from Ethiopia to the Arab world to Venice to Amsterdam to Doesburg – somebody who wants to get the flavor of this proces does best to listen to the coffee cantate from J. S. Bach. Coffee was the newest fad, the latest fashion. From other inventories it becomes clear that, around Doesburg, the ‘elite’ (preachers, rich traders, burgomasters) were the first to catch this wind – farmers followed somewhat later. But it was not only the habit of drinking coffee that spread around the world (and by now seems to have reached China). The production of coffee went global too. Dutch Jews went to Surinam where money from Amsterdam merchants was used to invest in coffee plantations. Slaves were brought from Africa to do the real work, proud ships travelled between Amsterdam, Africa, Surinam and Amsterdam to transport all the stuff (the triangular trade, as it was called). From Amsterdam it was send all over, among other destinies to Doesburg. And – I almost forgot – the Dutch government of course taxed coffee. It’s all in this story: the dynamic role of consumers, the grocers – these proverbial boring and limited people – who revolutionized consumption and life styles, entrepreneurs, the decisive role of capital, global networks, the international spread of culture and technology. And slavery.
Can we call this capitalism? I think we can. Once upon a time, I kept myself busy with sorting out and investigating all sorts of mutually inconsistent definitions of ‘Capitalist agriculture’. The only consistent definition of ‘Capitalist agriculture’ is one which makes a distinction between the owner (and seller) of the products which are produced and ‘other labor’ on such a farm, be it wage labor or bound labor or slave labor (This is more or less the definition of Niek Koning, see his ‘The failure of agrarian capitalism. Agrarian politics in the United Kingdom, Germany, the Netherlands and the USA, 1846-1919′). Coffee was produced with slave labor – a coercion based production process which was part and parcel of the modern capitalist world market for coffee. And slave labor was necessary for this, as Surinam (and other Caribean countries) did not have labor markets large enough to provide enough labor, while the costs of slave labor were, considering mortality, clearly below subsistence. Contrary to the impression given by Deirdre McCloskey, capitalism is surely not a one way road to a prosperous, civilized society – though the combination of dynamic consumers, profit oriented retail, global trade and producers from all over the globe often works magic when it comes to innovation. But not always when it comes to labor. Not back then, not nowadays.
So, Peter Radfords hits the nail on the head:
‘But what about worker dignity?’
Capitalism, as I read history, looks like greedy barons financing greedy “would-be-baron” wholesale traders to buy from greedy entrepreneurs monopolising (especially after Newton cracked the mathematics of physical force) the new technological opportunities of employment for farm workers dispossessed of their livelihoods which had been the objective of Baconian science. And like patrons of old, the Edisons of this world did not innovate: they employed others to innovate for them. In short, Capitalism looks to me like taking advantage of the theft of other people’s physical and intellectual capital.
How I admire Peter Radford’s gift of saying so much in so few words! In Britain right now (apart from painfully empathising as an islander with Japan’s nuclear predicament, and concern over oily dishonesty about the attacks on Libya), our domestic economic crisis is caught in this Radford nutshell:
“You see, education is a private, not a public good. Workers benefit from a better education so they should pay for it. The capitalists will look after themselves thank you very much. So should the workers”.
As a Distributist I have long been supportive of workers once again becoming ABLE to look after themselves, but when I listened to David Cameron’s “Red Tory” Distributist guru Philip Blonde, that outcome was precisely what he seemed to take for granted as a starting point. What will happen in Cameron’s “Big Society” when former students (some already reindebted to the banks for as much as £60,000) go to the banks for a loan to buy a house? Grateful students would be glad to pay back society by honourably working for it, but one can hardly be grateful to rapacious banks. Actually, Ian Duncan Smith’s benefit reforms go in the right direction, though hardly far enough to change our national ethos from self-righteous distrust to gracious and grateful sharing.
I saw a possible answer to all this in Peter’s conclusion:
“The wealth machine started rolling when dignity was conferred on greedy entrepreneurs. When they came in from their long held social outcast status. …”
Should we, then, return the status of entrepreneurs and their money to what it was, disempowering them by doing our own thing with our own forms of credit?
Dignity and respectability were not conferred on capitalists, merchants and entrepreneurs beginning in the late middle ages in Europe. They had to seize it and wrest control of governments away from the ossified landed classes – the church and the landed nobility. That changed laws and institutions and gave rise to the modern nation state.
Let us also not forget the idea that the commonly held store of knowledge leads to increased productivity. Even some orthodox economists have a hard time believing that the net worth of any one person is attributable to them alone. They suggest that they type of society they live in has a lot to do with this, and that the gains we see now come to us as a result of past work. Such advances in technology and productivity we inherit in common, which implies that they should be shared more than they are, which points to the political and moral questions that are always involved when asking about the distribution of wealth and income on any scale.
Robert Solow raised this question in 1957. Mill, Ricardo, Marx and Malthus made the distinction between earned and unearned, or the idea of societal inputs, or wealth created by circumstances. Economic historians like Joel Mokyr make the point that the unfolding knowledge of the past amounts to a “free lunch” since it is by far the biggest source of wealth today.
Vast inequalities enable the wealthy to change the rules, thereby allowing the privatization of benefits, the socialization of costs, and the delusional belief that your own wealth was created entirely by you. At great cost of slavery and genocide, as Omahkohkia points out.
Trouble is, this is bad history (from a 19th century textbook). Just three by now well-accepted facts – Merijn’s story about coffee is the same as the story of spices – European food is the middle ages was heavily spiced, and this came from India and Indonesia, via Alexandria and Venice. In the era of high feudalism. The landed classes were economically enterprising from early on (see any recent history of agricultural development). And the old regime of nobility and landed wealth was dominant in Europe until the late 19th century (see, eg Arno Mayers).
Bad history makes for confused analysis. Peter’s point about inequality and dignity is well made. No need to ground it on long-discredited myths.
In response to Jeff’s disagreement with Peter Radford, weren’t the entrepreneurs of medieval times Jewish moneylenders enabling merchants to sell the produce of the land? (The word, of course, hadn’t been coined then). Otherwise much of what Jeff says I agree with, especially about the free lunch of “unfolding knowledge of the past”, which unlike physical lunches, costs nothing to share. But was there much of a “commonly held store of knowledge” increasing productivity before the invention of printing?
In response to Peter T’s cheap put-down, I live surrounded by archeological remains from which I have drawn my own conclusions. I make a point of seeking contextual and timely evidence, as well as open-minded comment based on the “unfolding knowledge of the past”, being well aware much of that had been censored from modernism-justifying 19th century textbooks. May I suggest you read for yourself More’s “Utopia” and Bacon’s “Advancement of Learning”, Peter?
I can admit when I have been mistaken. I did not mean to imply that the transition was sudden and complete. It most certainly was not.
However, there is a difference between two wealthy classes being economically enterprising and seeking new ways to increase their personal fortunes, and the sources of that wealth. On the one hand, merchants through trade, then as a source of finance for what eventually would become industrial production.(Broad brush, loss of nuance). The landed classes sough to improve the productivity of the land. It is these sources of wealth and income that seem to give rise to the clash, not that one was any more enterprising than the other, though that may certainly be true. We can also note that there is a wide variety of activity here, as some merchants sough to legitimize themselves via land acquisition, the same way that some of the landed aristocracy could put some of their wealth to use by financing trade and production. This may help account for the ability of the landed aristocracy to maintain wide influence until the 19th century.
What then enables one class to displace another as the dominant class of a society? Trade and industrial production began to outstrip agriculture as a source of wealth and power. This was played out in the U.S. as a slave holding agrarian south began to lose influence to a more rapidly industrializing north.
Are we not similarly concerned with sources of income and wealth now? Is it these different sources that enable a workable definition of class and class interests, such as capital (somehow defined) and labor? And that such differences enable rule and institutional changes (within a given historical context of course)for one class as opposed to another?
What you are saying requires a lot of thinking about, Jeff. Okay, there are different ways of defining class, but I am myself not seeing those as the cause of the “clash”.
Pre-Capitalism the ruling class tended to be military conquerors. The pre-Christian conquered tended to become slaves, but in the medieval period the Church ameliorated slavery into serfdom, where the serfs had their own land and worked only part-time for their Lord, who was responsible for them. The system, still evident in family trees of management structure in large companies, was hierarchical, with God at the top and kings and the pope presiding over the equivalant of line and staff (advisory) management structures. The king was responsible for everybody and to do his job was entitled to resources from the whole country. Great lords similarly held large estates under the king, and successive levels right down to serfs were entitled to resources from their own ever smaller sub-divison of the land. The Church, meanwhile, was given grants of land for parish churches (i.e. community buildings), abbeys, convents and schools, these developing agriculture, architecture and even (at places like Fountains Abbey in Yorkshire) a surprising degree of technological industry, their wealth accumulating until the resources of the abbeys rivalled that of the great lords, the resultant corruption leading long before the Reformation to the establishment of protesting friars trusting God to provide via Christian charity.
The point of all this is that status, right of command and access to wealth depended on one’s level in the hierarchy, not on whether one was prince or prelate, soldier or teacher; not now whether one is a landlord, a banker, a “businessman” or a worker, all of whom have shared interest in keeping the system going. No; one’s access to wealth is still related to the size of one’s estate, credit base, added value or management responsibility, and it seems to me that any competition, seeing this, is to go up the hierarchy, not across it. That is much easier for those who can create money out of nothing, as witness the rash of stately homes built in Britain after the creation of the Bank of England. That the ambitious who succeed in going up the hierarchy tend to turn excess money into property may be likened to making a private note of an evanescent conversation.
Saner people, like Dickens’t Mr Micawber, say “What the hell. So long as we’ve got more than enough”. Sadly, economists have taught us to economise: “look after
the pennies and the pounds will look after themselves”. This English disease, what one wag called “hypertropic accountantitis”, has become a global epidemic, as the ambitious have learned to economise on the need for creative enterprise by economising on what, if anything, they leave for those at the bottom of the hierarchy. Who needs enemies when you have partners like that?
Dave, What you say also requires a lot of thinking. I agree that within any social system the access to wealth depends on one’s status in the hierarchy. But it also seems to me that one’s access to and command over wealth determines one’s place in the hierarchy. These things are almost never pure, and I apologize if I suggested that they were. I can think of examples where political power lead to wealth acquisition, such as Ancient Greece, or obtaining a position in the British East India Company and then a posting to India. Both probably required connections, and thus, though it pains me to use this term, social capital. These connections themselves likely depended on the wealth acquisition of one’s parents and social circle. I can also think of examples where access to wealth has led to undue political influence to the great detriment of those of us who are not on the Board or management team of places like Goldman Sachs. Bank deregulation in the U.S. seems to be a prime example of this.
Debates over ‘free trade’ constitute debates over the changes in the rules and institutional structure. Whether one will be helped or harmed by such changes depends on where you stand in the current system. Changes in tariff policy can easily be a boon to exporters and a curse to importers. Sometimes it is the same person in the same business that does both. But the usual conflict in this case would be one that pits domestic industry and labor vs import/exporters, consumers,and foreign industry and workers. Since “capital” had an upper hand in these debates in the U.S., Clinton and Congress passed and ratified NAFTA. This change in the rules helped gut what was left of industrial labor and labor unions.
In a similar vein, I had a mild disagreement with my dissertation advisor over the existence of a privileged class in the old Soviet Union. I argued that members of the Communist Party constituted just such a class. He disagreed. Party membership did not do it all, but it sure seemed to be a prerequisite.
I enjoyed your last paragraph very much.
To be clear, I have no disagreement with Peter Radford’s position on the current moral economy. I have an irritation with justifying that position by referring to a version of history that has been thoroughly undermined over the past 50 or more years. By, for example, Janet Abu-Lughod and Wallerstein on the role of commerce, Kenneth Pomeranz on the supposed contrasts between Asia and Europe, Arno Meyer and David Cannadine on the persistence of the old regime (and see also Michael Mann for a cogent argument that class is not a useful category before the 19th century), Charles Tilly on state formation, Linda Colley and John Brewer on the the English state, pretty much any historian on late medievalism….
There is a very different – and very interesting – picture out there, founded on detailed research into archives, patient reconstruction of trends, and consideration of many different lines of evidence. It deserves to be assimilated into economics, because it calls into question the standard explanations of how we got here (and where exactly “here” is). Who knows? It might even offer some pointers for getting somewhere else.
Thanks for your responses, Jeff and Peter. I agree with only slight qualification, Jeff, that “one’s access to and command over wealth determines one’s [initial] place in the hierarchy”, BUT “These things are almost never pure”. In our “one nation Tory” tradition, there are many who are satisfied with the status they already have, and perform responsibility the duties their wealth was intended to support. On the church side, at least, there was also always an element of meritocracy, as when in recent times the son of a peasant became Good Pope John. It is interesting that Gorbachev, too, was the son of a peasant: his “Manifesto for the Earth” now advocating return to rule by village elders rather than by ambitious, still half-baked children of an elite. (That may be one pointer towards “getting somewhere”, Peter). Anyway, the issue we had been discussing I took to be class war, and having slept on it, my argument still seems to hold: the problem is more the psychology of social climbers than competition between evolving social classes. People haven’t changed that much.
Peter, you not having said WHO was justifying their position with discredited 19th century history, the inference was that you were applying it to the last contribution it could have applied to, which (erroneously or falsely) was mine. You obviously read more recent authors whereas, as I explained, I prefer contemporaries with the period; having been introduced to the medieval archives of our local cathedral, I entirely endorse your main point now. But mainstream 19th century history was discredited by an independent observer a lot longer than 50 years ago. At Ryall during his “Rural Rides” of 1822, non-Catholic William Cobbett was moved to say some pretty harsh things about what he saw, and in 1824 published his very extensive research as “A History of the Protestant Reformation in England and Ireland: showing how that event has impoverished the main body of the people in those countries”. Dynamite! That period’s version of “The Inside Job”?
Peter and Dave,
It appears that I have some reading to catch up on. Everyone’s posts here have helped my understanding evolve. I have some Economic History on my bookshelves that I have not read for quite some time, and I am going to try to look into some of the authors that you suggest.
I take Peter to be mostly disagreeing with me. Like I said, I need to catch up on some reading. Now that I do not have to search for a job or prepare for a cross country move, I might actually have the time.
If I was disagreeing with anyone, it was Peter Radford. I take his main point, but thought the historical story he told reflected the general ignorance of economics about the findings current in history as a discipline. Which I think a pity, because the current research supports many of the directions Peter advocates.
Thanks again to Peter T and Jeff. All the best in your future, Jeff. Thanks for the explanation, Peter, though I had thought Peter Radford was being ironical. Anyway, the point of his blog was the confusion caused by the many contradictory claims as to what capitalism is, which I personally have only got over by looking at the reality through history and deciding for myself. That we seem so agreed on this makes all the more poignant the parallel discussion on “The End of History”.
I recently attended an informal debate at Lincoln University (New Zealand) on the future of energy. One of the debating panel was University of Canterbury senior lecturer in economics Eric Crampton, an American export who has been in NZ for well over a decade. His general position was that the market would solve problems such as global warming. (In fairness to him I must say he did demonstrate a bit of non-standard thinking.) He supported his contention by citing the increase in home insulation in NZ, saying that the cost of home heating was impelling Kiwis to insulate their homes. In fact standards requiring building insulation were introduced by interventionist Prime Minister Robert Muldoon, and national and local government subsidized loans are assisting people to insulate, including retrofitting. Evidence is lacking that market forces have increased the uptake of building insulation in NZ. I think that free-market economics’s contribution to progress is exaggerated by its apologists.
The global total of subsidies of fossil fuels is $312 billion a year. The reduction in energy demand that would follow on an abolition of these subsidies would be 5% of the world’s total, making it equal to the current energy consumption of Japan, Korea and New Zealand combined (IEA 2010). There are also the hidden subsidies to the fossil fuel industries in the form of failure to pay for negative externalities of climate change and ocean acidification.
Then there are the subsidies and tariffs applied to agriculture which are antithetical to market theory.
My contention is that what may appear to be democratic capitalist countries can fairly be labeled oligopolies which have added non-market features to the economy mainly, but not always in the interest of the powerful. Intergenerational equity is almost always ignored.