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Professor Peter Saunders

The Romance of Capitalism

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Capitalism lacks romantic appeal. Arguments in favour of private property rights and free market exchange do not set the pulse racing in the way that fiery speeches about socialism, fascism or environmentalism can. Capitalism can justifiably boast that it is very good at delivering the goods, but increasingly in countries like New Zealand , this fails to win hearts and minds, for we have come to take our affluence for-granted. We want something more than just comfort to believe in.

Where capitalism delivers but cannot inspire, socialism inspires despite never having delivered. Socialism’s history is littered with failure and human misery on a massive scale, yet it still attracts the affection of people who never had to live under it. As Martin Amis says in his brilliant analysis of Stalin, Koba the Dread, western fellow travelers have never really understood how evil communism was. That’s why it’s still cool to be a socialist.

Radical environmentalism also has the happy knack of firing the imagination of idealists, for it has much in common with old-style revolutionary socialism. Both are oppositional, defining themselves as alternatives to the existing capitalist system. Both are moralistic, seeking to purify humanity of its selfishness and appealing to our ‘higher instincts.’ Both are apocalyptic, forecasting certain catastrophe if we do not change our ways. And both are Utopian, holding out the promise of redemption through a new social order. All of this is irresistibly appealing to romantics.

Boring capitalism cannot hope to compete with all this moral certainty, self-righteous anger and sheer, bloody excitement. Although it does very well at filling people’s bellies, it struggles to engage their emotions. But as Johan Norberg demonstrates in In Defence of Global Capitalism, the history of modern capitalism is actually far more heroic and inspiring than any socialist or environmentalist fable could ever be.

The spread of capitalism on a world scale has scythed down poverty, for example, in a way that Bono and Geldorf could only dream about. In 1820, 85 per cent of the world’s population lived on today’s equivalent of less than a dollar per day. Today it is down to 20 per cent. World poverty has fallen more in the last fifty years than it did in the previous five hundred.

Capitalism has also allowed more people to live on Earth and to survive for longer than ever before. In 1900, the average life expectancy in the ‘less developed countries’ was just 30 years. By 1998 it was 65 years. To put this extraordinary achievement into perspective, the average life expectancy in the poorest countries today is fifteen years longer than it was in the richest country in the world – Britain – at the start of the last century.

Capitalism has also released much of humanity from the crushing burden of physical labour, freeing us to pursue ‘higher’ pursuits instead. One hour of work today delivers 25 times more value than it did in 1850, and this has freed huge chunks of our time for leisure, art, sport, learning and even romance.

The more sophisticated critics of capitalism accept all this, but (echoing Marx) they argue that capitalism has now out-lived its usefulness. They complain of a growing preoccupation with consumerism; that we are too materialistic; and that our increasingly unhappy and dissatisfied lives cannot be turned around until we reject the capitalist way of life.

But when, exactly, did capitalism stop promoting human wellbeing and become a drag upon it? When I was a university teacher, my students often maintained that our society has become too materialistic, but whenever I asked them at what point in history they thought we should have abandoned the drive for growth, they always answered: ‘now!’ They wanted to keep everything that industrial capitalism had delivered up to this point – the comfortable housing, the music systems, the cheap flights to foreign countries, the medical advances, the increased education and leisure time – but they were happy to deprive future generations of any further benefits that will be generated in the years to come. I used to ask them what they would think if their parents and grandparents had reasoned along similar lines and abandoned economic growth twenty, fifty or one hundred years ago.

Back in the nineteenth century, Karl Marx’s theory of the ‘immiseration of the proletariat’ held that capitalism couldn’t even provide basic food and shelter for the masses. He predicted mass poverty, misery, ignorance and squalor would be the inevitable consequence. We now know Marx was spectacularly wrong. Working people today earn a good wage, own comfortable homes, have shares in the companies that employ them, go to university, win entry to the professions, set up businesses and run for high office. This is the legacy of capitalism.

The western ‘working class’ (to the extent that such a thing still exists) has been so busy improving its life that it has quite forgotten about its historic mission of overthrowing capitalism. And that is even more true of workers in non-capitalist countries. Wherever populations have had a chance to move, the flow has always been towards capitalism, not away from it. The authorities never had a problem keeping West Germans out of East Germany , South Koreans out of North Korea or Taiwanese out of Communist China.

So the disaffection with capitalism has not been coming from ordinary workers. Its source is the intellectuals. But what is about capitalism that so upsets them?

Intellectuals have no responsibility for practical affairs, and can only make a mark by criticizing the system that feeds them. They hate capitalism because they think it doesn’t hold them in appropriate esteem. They spend their childhoods excelling at school and university, only to find later in life that their market value is much lower than they assumed it would be. Seeing ‘mere traders’ enjoying higher remuneration than they get is unbearable, and it generates irreconcilable disaffection with the market system.

In The Fatal Conceit, Friedrich Hayek suggested that capitalism also offends intellectual pride, while socialism flatters it. Intellectuals like to believe they can design better systems than those which tradition or evolution have bequeathed, but global capitalism is a largely unplanned system. Nobody constructed it, nobody runs it, and nobody really comprehends it. Capitalism therefore renders intellectuals redundant. It gets on perfectly well without them and it deprives them of a leadership role.

This is the key reason why intellectuals spend their lives criticizing capitalism. They are upset that the dynamic interplay of free markets keeps producing outcomes without anyone ever having to seek their prior guidance and moral approval.