Capitalism - historical note
29 march 2002

The development of the West provides many lessons which can help people see how development elsewhere may unfold.

1 Surely capitalism has been simply a crude expression of greed?

The West developed capitalism across many centuries but perhaps most obviously beginning in the 16th Century. That is when ideas developed and cohered concerning freedom of personal action, expression, conscience and intellectual inquiry; the rule of law, property rights and contract law; and sophisticated financial mechanisms.

States developed with varying emphases on the freedom of the individual and the role of the state, varying attitudes to scientific and intellectual inquiry, and varying reliance on agricultural or industrial wealth creation. But the pattern is there and it was admirable in itself and is now desirable anywhere.

2 Hasn't capitalism just been about power elites hanging on to advantage?

Capitalism grew in tandem with many social developments, and in creating a capitalist middle class it also further shifted the weight in society away from aristocratic power.

The freedom of individuals to join with others to increase and dispose of their wealth how they liked is the real underpinning of capitalism. Capitalism puts the vigour of many individuals to work for the gain of all of them. Though the weaker parties can obviously be exploited, they do volunteer for the exploitation. Workers have historically been worked too hard and underpaid (where they have) not because they were slaves, but because they did not want to be sacked. To some extent at least they volunteered to work hard, just as their bosses volunteered their capital and management skills.

3 Surely capitalism has had to be tamed to do wide good?

Middle-class capitalism was originally sanctioned by aristocratic elites because it tended to enrich them. It has more recently been sanctioned by democracies because its bi-product is social good. The good its vigour does is unintended. Movements to increase the good it does reckon to achieve this by forcibly redistributing some of its wealth and by regulating its excesses. There have been enough capitalists who accept these "social contracts" for the system to work almost everywhere it has been tried. But the societies which have gained stability and even moral worth in this form of contract have to keep a weather eye on maintaining opportunities for opportunists. Almost everywhere "Controlled Capitalism" has been tried (that is, nearly everywhere), there have been gains (including economic ones) but also costs in lessened wealth creation or unemployment.

So refomers need to remember that, say, taxation risks killing the goose which lays the gold eggs, and that stability and fairness are only some of the qualities societies seek: outlets for the vigour of individuals are others. The freedom of capitalists to create business opportunities is as much a "freedom of expression" as is the writing of a play protesting the crassness of commercialism.

4 Haven't the world's workers had revolutions to tame capitalism?

Actually, capitalism developed as a burgeoning middle class and manufacturing world exploited resources (wood, coal, oil, iron) which were in the hands of a land-owning class which lived on rents, not speculations. The middle class of merchants and industrialists were generally parliamentarians and thus reformers in the face of aristocratic government. Of course, aristocrats weren't necessarily vicious in their use of labour, and capitalists were in necessary tension with it. But capitalists were in some sense clearly "progressive". Perhaps the French and Russian revolutions of 1789 and 1912 were different from what was going on in England because they were directed at land-owning aristocrats in an agrarian world whilst by even 1789 Britain was already an urban and industrial one. So our workers were at war with a middle class and a parliament, not an exclusively aristocratic world. They had only to get into parliament, and they did, without needing to trash the aristocracy. Even our 17th century "revolution" was different to the French and Russian equivalents: it was a matter of a powerful middle class asserting itself, not a few intellectuals mobilising an impoverished peasant class and urban mass.

5 The left is surely vital now to civilise capitalism?
Historically, workers formed associations to civilise the relations of labour with capital and that movement produced the left hand of a double-handed class politics which characterised Western development. When I claim (and I do) that capitalism is good because that is what Western history shows - can I fairly claim that the Third World should develop in broadly the same way, but without the socialist bit of the story? Yes