Capitalism isn’t nice; just necessary

If you happened to be watching any of the BBC’s “city season” programming over the last few days, you may – like me – be coming out of the weekend feeling pretty depressed.

Whether it was BBC2’s excellent Saturday night documentary 1929: The Great Crash drawing chilling comparisons between then and now, or Peter Day’s Radio 4 In Business which looked forward at what will hapen post-recession, it was all sobering stuff.

The former really did show how we seemed doomed to repeat history and never learn: in the 1920s they believed boom and bust was a thing of the past because technology and the dawn of world trade had changed the rule book, just as many people in the 2000s felt about the internet and globalisation. The programme also explained how the lack of regulation resulted in disaster; and in recent years, many of the key post-Depession government oversight regulations put in place by FDR have been torn up by Reagan, Bush x2 and even Clinton administrations. It also described how the 1920s boom worked because so much of what was going on wasn’t understood or even known about by many investors or officials, and how this resulted in an iceberg waiting to hole the entire endeavour; exactly the same as today’s complete lack of knowledge of investors about sub-prime mortgages, credit markets, derivative markets and the market in loans repackaged into bonds has wrecked the 21st century economy. BBC Radio 4’s More or Less did a good programme on this aspect, too. (All BBC programmes are available on the BBC iPlayer for the next few days, in the UK.)

The only slight fly in the ointment of all this coverage is the slightly annoying BBC tone of admonishment, Auntie can’t help being Auntie sometimes, and the City season seems designed to tell us all off for our ignorance, hubris and most of all for our greed, which the BBC coverage never fails to put the blame on of all this economic downfall. And of course they’re right – it was the banks’ greed to make money (to sate their shareholders’ greed), and the greed of many traders like Bernard Madoff committing outright fraud, that has caused much of the maelstrom we see around us.

But to say “it would all have been okay if we hadn’t got greedy” rather misses the point. Because at its heart, capitalism is greed. It’s greed adapted into a workable system for running a civilisation. Take away greed and you take away the desire to buy things, acquire more, and to beat the neighbours. The greed that drives people to find the best deals, and traders to make the most profit for their investors, is at the heart of the engine that drives capitalism. Without greed, capitalism itself doesn’t work. But that’s okay, because greed is an intrinsic part of the human animal, almost as basic to us as our urge to procreate, and it will take many centuries for us to evolve out of that basic fact.

This is why communism has failed. Communism (and Marxism, and socialism) all rely on the basic optimistic view that people just want to work together to make the world a better place. But it forgets that people at heart are not like that: we try and be altruistic, but that urge isn’t as powerful as that of the selfishness and greed, and so communist systems become hopelessly corrupt almost from the start, and also underperform and stagnate. Any system that assumes that people en masse aren’t greedy and prone to corruption is bound to fail; only by accepting the reality and either playing to its strengths or rigorously compensating for its deficiencies will a system work.

I’d love to live in a world where greed wasn’t the most important, most dynamic driver of business. But as a realist, I have to accept that I do live in such a world: and that capitalism is the best way so far we have come across to harness those traits for the greater good. But we have to also accept that within the centre of our civilisation is this very dark heart, and it’s going to keep on exploding out of hiding every now and then to show its teeth. This latest recession is just the most recent demonstration of its malign but inescapable influence: boom and bust will be with us for many, many years to come. It only becomes truly dangerous and deadly – as in 1929, and possible in 2009 – when we blithely forget that its there and about to pounce and we let down our guard, take away the oversight, remove the regulations. That’s when ‘bust’ becomes ‘depression’ rather than merely ‘recession’.

And we just sleepwalked into it all over again, because we forgot our history and our basic human nature.


  1. It’s curious this ‘love affair’ of yours… after all, in capitalism we are all expandable …

  2. andrewlewin

    Oh, not a love affair (can you have a “love affair” with something you describe as a “very dark heart”?) – just being realistic. It’s what capitalism is, and capitalism works because it’s in tune with the human condition as it is right now rather than what we would like it to be. It’s why it works, as much as we loathe it – because when capitalism is greedy and dark and nasty it holds up a true mirror to ourselves. And we don’t like what we see.

    I’d love there to be a day in the future – a Star Trek like utopia – when this all changes. But it’s a long time off yet.

  3. You are aware that what we now dub as ‘capitalism’ has nothing to do with human condition … it’s an economic system in which the human condition is frequently overridden … and by the way, how’s your health care ?!!!

  4. andrewlewin

    No, but it relies on the faults of human nature to work. Just as other systems rely on the absence of these flaws to work, which is why they consistently fail – such systems need people to be better, and we’re not. Yet.

    Health care? Thanks goodness for the NHS, a nice little bit of socialism that has managed to survive for 60 years.

  5. “I’d love to live in a world where greed wasn’t the most important, most dynamic driver of business.”

    I’m not convinced that it is – reducing human motivation to a single overriding factor tends to be the great mistake that social science and economics makes.

    Having written about business a lot and talked to an awful lot of small business people, the motivations tend to be highly diverse once you get beyond “making a comfortable living”. Few want to be really rich, and even less value money for its own sake.

    For most, it seems that businesses get started because they want more control over their lives, or are finding a career frustrating, or want to build something they can leave to their family.

    Capitalism works not because people are greedy, but because people have aspiration to change. Those aspirations are diverse, though, and that’s something that we always have to bare in mind.

  6. andrewlewin

    Oh, I’d never argue that motivation is a single overriding factor – just that it’s the most important driver in capitalism. There are plenty of others as well, and you point out great ones that I entirely agree with.

    I don’t agree that capitalism works because people have aspiration to change, though: I think a side effect of capitalism is that it enables people to accomplish this change, and it’s for this reason that we accept and tolerate its dark side. The need for change is another very human characteristic; a system that doesn’t allow this (Communism comes to mind again) is also never going to work. So yes, this is the brighter, happier side of the dark heart.

  7. Although a parasite of human philosophical aspirations … capitalism abhors philosophy … and it’s obvious that you confound commercial environment, industrial production and human higher goals with capitalism … I must remind you both that capitalism is the perfect way to explore your productive capacity for free … and as history has proven, capitalism can exist even in countries ruled by military dictatorships … like Chile and Argentina in the 70s.

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