This post ties together two other posts I have written on capitalism, markets and morality.
The following things are all different but are often not distinguished properly:
- Capitalism – The private ownership of the means of production
- Markets – A system in which buyers and sellers engage in exchange
- Ethos of selfishness – People have very limited duties to benefit others and have extensive permission to engage in self-interested action.
- Egalitarianism – Equality of outcome or opportunity for outcome is intrinsically good.
- Utilitarianism – Everyone’s happiness counts equally, so more count for more.
The pros and cons of all of these things are quite different. Some of these things are foundational ethical theories, some are theories of personal morality, some are evaluations of culture, and some are institutional systems of ownership.
Today, whether one believes in an egalitarian society is predictive of whether one is anti-capitalist, anti-big business, anti-market, anti-ethos of selfishness and anti-bourgeois morality. Also, whether one is pro-capitalist, pro-business, or pro-market is predictive of whether one is pro-ethos of selfishness or pro-bourgeois morality. I think there is room for a more nuanced mix of these beliefs.
Capitalism & Socialism
Capitalism is defined very specifically as the private ownership of the means of production. The main argument for it is that it seems to have played a major role in the greatest increase in human welfare ever over the last 200 years. Moreover, experiments with socialism – extensive public ownership of the means of production – tend to go very badly.
The Labour Party’s Clause IV used to say:
“To secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, distribution and exchange, and the best obtainable system of popular administration and control of each industry or service.”
Clause IV was altered by Tony Blair in the 1990s to be focused not on socialism, but on the broader ethical aims of the party. It is at least worth noting that it is a very long walk from the claim that it would be better to have a prosperous and equal society to the claim that Tesco should be taken into state ownership. There seem to be many other ways to achieve the aim of a prosperous and egalitarian society, such as redistribution, free childcare, increased skills training, and so on.
Being a pro-capitalist egalitarian is a live option – this is social democracy.
Going further, I think there are good social welfarist and egalitarian arguments for a common-ownership self-assessed tax, which would not be capitalistic.
Capitalism, big business and markets
Capitalism and big business are different to a market-economy. Firms are not markets. Herbert Simon a thought experiment to make this clear:
Suppose an alien intelligence were to study a strange world with “a telescope which reveals social structures”. Pointed at the Earth, Simon argued, that telescope would show lots of solid green areas with faint interior contours linked by a network of thin red lines. Both colours would be dynamic; new red links would form and old ones perish; some green blobs would grow, others shrivel. Now or then one blob might engulf another.
The green blobs in Simon’s vision were firms and other organisations in which people work; the red lines, market transactions. And if asked what the long-range scanner revealed, the observer would reply “large green areas interconnected by red lines” not “a network of red lines connecting green spots”.
The Economist
In a large company like Amazon or Tesco, decisions are not made by the market mechanism. Rather, the activities of managers and employees are determined by management structures and by algorithms.
Uber is a platform that provides a market for its drivers and riders to buy and sell services on. When demand increases, the price of a ride increases with surge pricing, so drivers are incentivised to provide more rides and consumers are incentivised to reduce their demand. To reiterate, most decisions in firms are not made like this – there is no market system set up to determine who does what project, rather managers or algorithms decide how it is done and who does it.
Conceptually, there could be a market economy that is not capitalist. The common-ownership self-assessed tax is one way this could happen. Under that system, everyone sets a price for all of their property, and they would have to sell if someone bids that price. The higher they set the price, the higher the tax they pay. This would increase market transactions and encourage more accurate pricing of assets, but it would do away with a key feature of private property, which is that you have monopoly rights over what you own – if you don’t want to sell then you don’t have to.
Another non-capitalist market system would be a system of worker-run cooperatives operating in a market economy. Thus, each firm would be owned and democratically run by its employees. The feasibility and scalability of this system is questionable because cooperatives are disincentivised to grow and accept new members.
Moreover, it is again a long walk from the claim that it would be better to have a prosperous and egalitarian society to the claim that we should not use market prices to make investment and production decisions. One could be in favour of a market economy, but also find other ways to realise a prosperous and equal society, such as redistribution, free childcare, skills training, and so on.
Suppose we were thinking about how to distribute cabbage. On the anti-market approach, we would not use prices, but would instead use state planning. A bureaucracy would have to decide how much cabbage was needed in Oxford on a given day, what type of cabbage people wanted, where they wanted to get it from, how they wanted it packaged, and so on. Doing this without feedback from prices is hard.
In a market system, if demand for cabbage rises, then supermarkets in a competitive market increase their prices. This sends a signal to consumers to limit their consumption of cabbage relative to other vegetables. This also sends a signal to cabbage growers to increase their production of cabbages to meet demand. This kind of information is lost in the absence of market prices.
An ethos of selfishness
Many people in rich Western societies think that their moral responsibilities are heavily circumscribed. Provided people stick to the rules and look after their family, any benevolent acts are purely supererogatory. I think the ethos of selfishness is wrong and that people in fact have quite extensive duties of benevolence. However, this is completely conceptually distinct from one’s assessment of the value of markets and capitalism.
Indeed, I think it is plausible to be pro-market and pro-capitalism but also in favour of extremely stringent duties of benevolence that require thoroughgoing self-abnegation.