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Introduction

Many people argue today that there is no alternative to capitalism: much of the last century can be seen as a conflict between capitalism and communism, and capitalism won.  History is no longer going anywhere (or seen to be going anywhere) because we have arrived at the end point - as Fukuyama's famously misleading title ('The End of History') indicates.  In any case, very few people today would argue that communism is a viable alternative.

But questions remain.  There are two questions I frequently ask; and most people seem to be annoyed by at least one of them.

• If capitalism is the answer, why is the world falling apart?
• If capitalism is not the answer, what is the alternative?

If Capitalism is the Answer

Most Western countries place a great deal of faith in the pursuit of profit operating in a free market, and it's easy to see why.  People are living longer and healthier lives; they are more comfortable and have more opportunities than ever before in history, and much of this progress can be directly attributed to capitalism.

But, almost everywhere we look, it seems that the world is falling apart.  Almost all the problems we face - global climate change, chemical and plastic pollution, the destruction of the rainforest - can be directly attributed to capitalism and its single-minded pursuit of profit.  And most of the remaining problems can be indirectly linked - wars, for example: people have always fought one another, but there is much evidence that the arms manufacturers and suppliers of other military equipment have a significant influence on governments' decisions to go to war.  There seems little dispute that the capitalist pursuit of profit is both driving the destruction of our planet and increasing social inequality.

If Capitalism is Not the Answer

There are many left-wing people willing to describe themselves as 'anti-capitalist', and it's easy to see why: given the damage which capitalism inflicts, it seems obvious to them that capitalism must be replaced - as quickly as possible.  What they are not saying is what they would replace it with.

There are numerous models of social organization which don't require a market to function - but none of them attempt anything nearly as difficult as running a country.  Various communist countries attempted to allocate resources on the basis of a rational, centralized plan, and every one completely failed: the job is far too complex, and circumstances vary far too much for a single policy to work well everywhere.  Markets can be flexible and responsive to need, in a way that a centralized bureaucracy will (in all probability) never be.

So What is the Answer?

Capitalism cannot be the answer, because capitalism is not a thing.  That is, capitalism is not a single thing or a single idea: it is a term used to describe a wide variety of ideas and realities on the ground, and many of those realities are incompatible with many of those ideas.  There are many different ways to understand capitalism, and many ways to implement it.

Many people are happy to celebrate and promote the 'free market', but there is no such thing as a free market.  Every market exists precisely because many constraints are imposed.  Goods and/or services are exchanged for money.  Other constraints depend on the rules and law in effect: you generally can't just change your mind and get your money or goods back; what can be sold; what counts as legal currency; what you sell must match, within certain limits, what you advertise - most obviously, weights and measures must conform to agreed standards; items sold for human consumption must not contain harmful substances; and so on.  Much of it is considered common sense, but the precise details vary from one country to another - so, in the UK, when you take out many kinds of loan, you have a cooling off period in which you can change your mind.

The rules which apply to a market will inevitably change over time, partly because circumstances change, and partly because one group or another will feel that the rules are weighted against them - as we have seen recently in the conflict between landlords and tenants.  People frequently disagree about what the rules which govern the market should say.

Capitalism may not be 'the' answer, but it seems fairly obvious that, depending on what you want to achieve, some forms of capitalism will be better able to deliver that goal than other forms.  As the old saying goes, money is a good servant but a bad master - and the same can be said of capitalism: it should serve people; people should not be forced to conform to the 'needs' of the market.

Adam Smith, the 'father of economics', believed that the market should operate within a moral framework which cared about the wellbeing of the people involved - but many people today argue instead that economists and politicians should keep away from making moral choices, and leave those to the individuals concerned.  This leaves the market to concentrate only on material and financial concerns, with the results we see today.

Moral concerns - caring for people and the planet - must be the responsibility of politicians as they set the laws which govern our markets, and of economists as they measure the activity and success of the markets.  Yes, it is hard to get people to agree what the moral principles ought to be, but the alternative is to resign ourselves to working within a system which is destroying the planet, knowing that what we are corporately doing is wrong, but defending our individual right to make as much money as we can.

And this means that we, the electorate and the shareholders, must demand that those who shape the market get their priorities right, and require that they put morals above profits.  If we fail to recognize that caring for people and the planet is a higher priority than making money, then we will soon have no market and no planet.

"We Can't Afford Morality"

While many will accept this general argument, many objections remain.  Possibly the most significant is the "we can't afford it" objection.  Yes, we must protect the people and the planet, but this concrete proposal is unreasonable - too expensive to implement, and not certain to have the intended effects.  We must do something, but not this: perhaps we should study the problem a bit more, and try to understand it better?

The obvious response - we can't afford not to deal with climate change - seems, somehow, unconvincing.  But history can guide us here.

If you read the history books, it is clear that every step in the right direction was opposed, and this argument ("We can't afford it!") was used almost every time.  Abolish slavery?  We would love to, but we can't afford it - the entire economy would fall apart.  Stop child labour?  Our factories would all become uneconomical and be forced to close down.  Allow men who don't own land to vote?  They will elect rogues who will bankrupt the country.  And so on.

If we leave our morality to the market, then many of these objections have real force.  If my competitors are employing children, at half the cost of an adult worker, then I can't compete unless I do the same.  But if the law says children must go to school, then the market adjusts: I can't benefit from their cheap labour, but neither can my competitors.   And, strangely, we all end up with a better, more educated workforce, which turns out to be more productive and better able to innovate.

The same happens when the law effectively prevents factories from dumping waste chemicals into the local river.  Again, it's a level playing field, so the market adjusts and we can afford to run clean factories after all.  And the workforce is healthier, because they are not being poisoned.  And, because we have to implement measures to prevent pollution, there is a real economic incentive to innovate and improve these measures, to re-use and recycle materials which would previous be thrown away, and that means we have to buy less raw material in the first place.  There are many varied benefits which arise because the law insists that the factory owner acts morally and respects the environment.

Every time people claim that they would like to do the right thing, but they can't afford it, the only effective response is to impose a law which requires them to do the right thing, and then - usually, after much noise and many objections - they discover that they can afford it after all, and their workforce is happier and their business is more profitable as a result.  People don't like change, even when it is good for them.  But that is the job of the government: to do what is right and good for the people and the planet, despite the objections.

Further reading:

• 8 Anti-Capitalist Science Fiction and Fantasy Novels - if we can imagine alternatives to the current system, perhaps we can start to build them.