Understanding capitalism – has it led us into big trouble?

Pondering why it is that I’m constantly encouraged to go out and buy, buy, buy way above my basic needs takes me into the deep water of trying to understand capitalism, the political system which is becoming dominant across our world.

It seem that capitalism is based on the idea that:

• Released from a ‘government knows best’ model of centralised control of the economy, the ‘invisible hand’ of the free market will bring us all to a good life.
• Entrepreneurs will use their own capital and initiative to create wealth which will trickle down.
• If we all look after our own interests the whole will benefit.

Vested interest of corporations

Capitalists are constantly looking for investment opportunities. ‘Growth’ is the god to be worshipped.  Anything which gives a financial return will take priority over our wellbeing and over the environment.  This helps me to understand why fashions change so rapidly (can’t wear last year’s colour), why cars choke up our roads while bus services are cut (more money made out of cars and road building than buses), why goods aren’t made to last (built-in obsolesce).

But Adam Smith, the ‘father’ of capitalism, said that some government regulation is important to control the vested interests of corporations.  What concerned Adam Smith was the power of ‘special interest groups’ who operate solely in their own interests. Government, he said, should never listen to this ‘overgrown standing army of special interests’ who will ‘fight to the bitter end to keep their privileges’.

He was writing at a time when those who were making big money from the slave trade were using all their power to try to stop the abolition of slavery. (In more modern times a ‘standing army of special interests’ managed to hold back for decades the regulation of smoking and of reducing sugar in foods)

Along comes Neoliberalism:

The question of the balance between controlling ‘the standing army of special interests’ and market freedom took me neatly to a word which was new to me but which I’ve begun to see as critical in my understanding: Neoliberalism.

Margaret Thatcher, an arch Neoliberalist, saw a minimal role for state regulation and insisted the free market could provide for all our needs. Of government she said:  ‘It should be restricted to the bare essentials: Defence of the realm and the currency. Everything else should be left to individuals, to exercise their own choices and take responsibility for their own lives.’ 

In the last decades of the 20^th Century Neoliberals, led by Margaret Thatcher in the UK and Ronald Reagan in the US, managed to drive home the message that ‘There is no alternative’ (to unregulated capitalism).

By spreading the word that public is bad and private is good Neoliberalism drove the programme of privatisation of public services in the UK. Lucrative profits to be made from essential services, especially when regulation and monitoring of the services is so weak. So it is that many of us struggle to get into work by trains which are either cancelled or late or sit hour after hour at the computer trying to find the cheapest energy supplier!

More recently the Brexiteers used reducing regulation as a major part of their campaign to get the UK out of the EU. But a closer look at many EU ‘regulations’ shows that, while they might hamper capital maximising profit, they are often very sensible, protecting us from harmful chemicals in food and restricting the use of environmentally damaging pesticides.

Since the fall of Communism it seems we now have a world which is increasingly dominated by different capitalist models. Neoliberal US leads the way with little regulation (all those chlorinated chickens and harmful pesticides) and the UK has become increasingly ‘Neoliberal’ under various Conservative governments.

So, perhaps it’s not Capitalism that’s the villain of the piece in our troubled world, but that minimal government regulation has allowed Adam Smith’s ‘Standing army of special interests’ to march forth, undermine democracy and keep their privileges.

Eileen Peck - The Worlds Gone Made

This is one of a series of articles by author Eileen Peck, questioning the challenges in today’s world and looking at possible solutions.

Find out more about Eileen here.

And check out more articles in this series here.