In an article published by The Times earlier this month, Conservative Party supporter Daniel Finkelstein argued “There is no alternative to capitalism, comrade.”
It echoed the point made previously by Peter Kellner, a Labour Party supporter, in The New Statesman.
If Labour has a purpose any more, it is to manage capitalism, not replace it or even reform it. The divide within Labour, and not just there, is between those that recognise that fact and those that don’t.
Both Finkelstein and Kellner base their argument on economics. Theory and the facts demonstrate that capitalism is always better than any alternative, whatever it’s called. And what are regarded as traditional anti-capitalist goals — elimination of poverty and equality — can be addressed more effectively by capitalism than state-ownership and other government interventions.
This is a position that can be challenged, particularly after the 2007/08 global financial crisis.There are hundreds of books that do it.
More striking is the authors’ reference to capitalism. What this is is not defined, but it seems to be a system where the market is allowed maximum scope in regulating production, consumption, saving and investment.
Economics2030 argues that this insight, which was originally distilled centuries ago, may have been relevant in economies where tangibles are dominant. But in economies dominated by services, the market doesn’t only not work. It doesn’t exist.
In economies dominated by services, value is exclusively created by constructive human interaction. Capital, to the extent it’s needed, supports that interaction. It does not create value.
And what supports constructive human interaction is more than capital conventionally defined. It includes law, culture, education, healthcare and other intangibles.
Capital, though this is the wrong name for it, in service economies is intangible and resides in the minds of parties to a value-creating service interaction. This can’t be traded as a commodity without an intolerable infringement on human liberty.
Perversely, both Finkelstein and Kellner are hailing the triumph of capitalism at the very moment when capitalism is disappearing as a system that depends upon the private ownership and trade in the physical means of production: factories, machinery and land.
In economies dominated by services, tangible capital’s role other than as a supporting process like railways, roads, hospitals and schools is in precipitate decline.
This is not a radical insight. About 80 per cent of the assets on the balance sheets of the largest companies quoted on the London Stock Exchange are non-tangible.Capitalist corporations have been quicker in recognising capitalism is over than most anti-capitalists. Their priority is influencing the legislation and accounting codes through which intangible capital is manufactured, owned and distributed (tax havens).
Economies dominated by services require the following to maximise value-creation:
- freedom for value creators to interact constructively with each other in non-exploitative ways
- the free availability of supporting processes: physical and intangible infrastructure. This should be freely available and preferable delivered on a non-profit basis.
If that is what Finkelstein and Kellner mean by capitalism, I’m with them, comrade.