Is capitalism the only system that works? On the one hand, capitalism promotes innovation and economic prosperity and has lifted over a billion people out of extreme poverty since 1990. On the other hand, the relentless pursuit of economic growth is trashing our environment and leading to a growing gap between rich and poor.
What do our readers think? We’ve had thousands of comments over the years from readers who are convinced that capitalism is the only system that works in practice and that there are no viable alternatives. Is this true?
To get an answer, we turned to Yanis Varoufakis, an economist, former Greek finance minister, and currently a member of the Greek parliament. In his new book, Another Now, he explains why he thinks capitalism doesn’t work and proposes alternatives for the future. What are those alternatives?
We are already living in an alternative to capitalism. I believe that capitalism has already evolved into something different, something that the historical defenders of capitalism would not recognise as capitalism. When I was growing up, there was the great clash between Left and Right, between those who believed in a decentralised, competitive market mechanism to organise the distribution of scarce resources among competing needs and those who believed in central planning or some kind of social democracy.
Since the crisis of 2008, we have a completely different situation, because financialised capitalism collapsed in 2008. Finance was refloated by central banks printing mountains of money, but market capitalism was not. We have lived in a state-financed economy for the past twelve years. Without the central banks – the European Central Bank, the Bank of England, the Bank of Japan, the Federal Reserve – the whole thing would collapse. So, it’s a mistake to think of the system we live in today as a market-based system.
It is a central bank-based system with a small number of companies doing remarkably well. The New York Stock Exchange is effectively propped up by 10 companies. And these are feudal fiefdoms. As soon as you enter Amazon, you leave capitalism, you leave the market, you are in a thing that is effectively owned by one person. So, we have a kind of techno-feudalism. The question is no longer whether there is an alternative to capitalism, because we already live in post-capitalist times. We had better choose the kind of post-capitalism that is compatible with the survival and flourishing of the species.
For a different perspective, we also turned to Fredrik Erixon, an economist and author from Sweden, and the director of ECIPE (the European Centre for International Political Economy), an independent think tank that supports the principles of free trade and economic freedom. What does he think?
Well, obviously there are a lot of countries in the world that practice a different form of economy than capitalism. That has also been true historically, so you don’t have to invent new systems to find alternatives to capitalism. I think what might be more useful is to talk about different variations of capitalism; the extent to which you want to have a free and open economy, the extent to which the government regulates the markets in which different companies operate.
Part of the definition of capitalism is a capitalist culture, and ‘capitalist culture’ basically goes back to this idea that the purpose of capitalism is to promote a lot of change. It’s there to promote innovation and technological change and to make sure that people’s wealth and quality of life improves over time.
Now, you can put a very big question mark behind the question of to what extent this capitalist culture is still alive today at all. People will say: ‘Well, you know, we probably live in the most innovative age ever. Just look at what we’ve done with the iPhone since it was introduced in 2007. Let’s look at the telecom revolution, since the early 1990s, etc.’ All of that may be true, but if you look at various indicators of capitalist culture, you find that the pace of innovation has slowed over a long period of time, that we have far too few industries, far too few companies out there to change markets, disrupt markets and basically try to end the lives of their competitors.
We have a much better organised competition, a kind of competition where companies don’t have to invest so much more in research and design, in innovation, in order to have a successful future and give a good profit to the shareholders. So, even if we have a system where many companies are privately owned, we can still say, and this is also true for countries like the United States, that the capitalist culture has eroded over the last 40-50 years, that we don’t produce as much change, which could lead to much more productivity, better use of resources and of course higher prosperity.
Are there alternatives to capitalism? Is capitalism the only system that works? Do we need to change our system to fight inequality and environmental degradation? What alternatives are there to capitalism? Let us know your thoughts and comments in the form below and we’ll take them to policymakers and experts for their reactions!