By Michael O’Brien
Taking inspiration from pro-capitalist economists from Adam Smith in the late 18th century, through to Friedrich Hayek in the 20th, and the tech bros of today, the belief that the ‘free market’ is the most efficient and natural way to organise the economy is instilled throughout society.
Adam Smith spoke of the free market as an ‘invisible hand’ guiding the economy. Through everyone acting in pure self-interest, finding their niche in life as an employer or worker producing whatever good or service, every commodity can find its buyer, and supply and demand will determine prices. This would produce what some of Smith’s followers went on to describe as a ‘spontaneous order’.
But rather than order, the history of capitalism is one of recurring economic crises. To explain these, pro-capitalist economists start from the premise that the market, left to its own devices, works fine, before going on to blame what they would describe as external factors as having ‘interfered’ with the market.
State interference
Typically, the state is painted as the culprit, as in the case of Hayek. The reality is that capitalism cannot survive without the state on which it relies for protection and representation against rival capitalist interests; for a legal framework to prevent or resolve disputes; and some degree of infrastructure and social reproduction in the form of health and education systems, not to mention having an established currency to conduct commerce!
Most importantly, capitalism as a system relies on the state as a means of repression through the system of courts, police and prisons, because, whether the pro-capitalist economists like it or not, working and indigenous people throughout capitalism’s history have shown a recurring impulse to resist the market system.
All that said, Karl Marx in his crowning achievement, Capital, actually demonstrated that even in a fictionalised ‘ideal’ capitalist set up, which was free from the state or any other external factors, crises would still feature because of tendencies that accompany the pressures of competition.
Other capitalist economists actually embraced recessions and the ‘creative destruction’ they bring. Joseph Schumpeter advocated for the benefits of crises from the point of view of the health of the system, with inefficient enterprises going bust, and the disciplining effect on wages from mass unemployment, as all laying the basis of renewed cycles of economic growth.
Yet other economists, like John Maynard Keynes, went in a different direction and advocated that the state intervene in the context of recessions through various policy measures – welfare, public works, state investment in industry – to ‘smooth out’ the boom and bust cycle and save the system from itself.
Despite disagreeing on many points, the various pro-capitalist economists agree that the free market, with or without state intervention, is the best way to organise the economy.
Democratic planning
Capitalism, relative to the feudal society that preceded it, represented qualified progress, as feudalism itself did relative to preceding slave and primitive societies from the point of view of the development of the productive forces (the combination of skills, knowledge, raw materials and technology in society). As with the capitalists today, the rulers of preceding forms of society themselves believed that they were living in the finished form in terms of the economic set up.
Given the advances in technology and the productive capacity of capitalism in the 21st century, side by side with the immense waste and destruction – to people and the environment – that accompanies the system, the conclusion that needs to be drawn is twofold:
Firstly, the vast majority of people objectively need an alternative means of organising the economy; and secondly, at least in theory if not yet in practice, the economy could be re-ordered on the basis of rationally establishing the needs of people, planning environmentally sustainable production of the goods and services to meet those needs, and sharing this work out in an equitable manner. In other words, a socialist society.
Planning the economy rationally for need as opposed to profit cannot be done on the basis of private ownership. Nor can it be achieved without thoroughgoing democracy at every level of society and at the workplace level. This is the true lesson of the collapse of the Soviet Union.
Moreover, this is an existential question in the context of the destruction being wrought on our environment and the outsized role of the arms industry in capitalism today, with all the horrifying consequences we see daily.
