Table of Contents
What is capitalism? A definition
Reproduced from: Kate Raworth (@KateRaworth) March 6, 2023
Let’s open up the black box of capitalism. I discussed what it means & what it does with @BernieSanders and @martinwolf on @BBCR4 last week. Here’s how I defined it – how would you put it differently? 1/n pic.twitter.com/d3RYeTZJTZ
— Kate Raworth (@KateRaworth) March 6, 2023
♦ Inspiration for definition
This definition was particularly inspired by the works of Nancy Fraser, @marjorie_kelly and Katharina Pistor – thank you all. 2/n.
♦ Start the Week – Democratic capitalism – marriage on the rocks – BBC Sounds
♦ Pick of the Week – Rajan Datar – BBC Sounds
It wasn’t always easy to get a word in edgeways on the programme (you might notice) – so it was great to hear @rajandatar featured some of what I shared about democratising the economy on #PickOfTheWeek – from 23 mins bbc.co.uk/sounds/play/m0. 4/4
♦ Starting the week with the most important conversation
Democratic capitalism – marriage on the rocks is an episode of the Radio 4 Start the week programme broadcast on 27th February 2023. The programme was presented by Tom Sutcliffe who expertly marshalled contributions from Bernie Sanders1, Kate Raworth2and Martin Wolf3.
The main premise of the programme was that democratic capitalism is under threat – even if it has ever truly existed – because the democratic process is increasingly subverted by the power of big money resulting in the rich getting richer and the poor poorer. That premise is shared by the most recent books of two of the contributors – Bernie Sanders’ It’s okay to be angry about capitalism and Martin Wolf’s The crisis of democratic capitalism. Bernie Sanders listed some of the problems arising from the current model of capitalism that exists in the USA (all of which are relevant, to some extent, in the UK). They included:
- The USA is an oligarchy, with handful of people controlling the economy and political power.
- The disparity between the pay of bosses and workers. When he was growing up it was in the region of 20:1 or 30:1, now its more like 400:1.
- In the USA today, three individuals own more wealth that the bottom 50% of the population.
- In the USA billionaires can legally spend unlimited amounts of money buying political influence.
- 60% of Americans live from pay check to pay check.
- 85 million Americans are uninsured or underinsured for healthcare.
- Despite the existence of great wealth in America, most people live under great stress – they are part of the ‘precariate’ who can, for example, be fired from their job if their car breaks down on the way to work.
The twin injustices of rising inequality and the confluence of wealth and political power was something which united all three of the commentators. Another area of agreement was recognition of the threat posed by climate change. (Unfortunately, as is commonly the case in public discourse on environmental crises, the existential threats presented by biodiversity loss and pollution were not mentioned.) It was good to hear the consensus on these fundamental injustices of capitalism, but the really interesting parts of the programme arose from the differences in their views on what exactly capitalism is and how to tackle the problems arising from it. These differences of opinion were mostly evident between the mainstream economist Martin Wolf and the proponent of Doughnut economics Kate Raworth.
Kate Raworth provided what seemed to me to be both a broad and beautifully succinct definition of capitalism which I paraphrase here: Capitalism is a system to deliver profits to the owners of wealth via dividends for the owners of shares, rent for the owners of land & property and interest for the owners of debt. It enriches the already rich and squeezes everything else that we value. It undermines and underpays waged workers, privatises public goods like healthcare and transport, exploits care provided by families and communities, degrades the living world and appropriates land and culture from indigenous people. It captures the legal and political systems so that it can secure and reproduce its priveledge.
Martin Wolf wholly disagreed with that definition, going as far as to say that capitalism was the inverse of it! But rather than critiquing any part Kate Raworth’s definition, he relied instead on trotting out the foundation myth of capitalism which would have us believe that capitalism came to the rescue of people struggling under the yolk of feudalism. But that account completely ignores the damage done to feudalism by successive waves of peasant revolts and the social upheavals caused by pandemics. Rather than coming to the rescue of peasants, capitalism, with new instruments like parliamentary enclosures, was used to put peasants back in their box, robbing them of their hard-won access to independent subsistence and shackling them to waged labour. (For an account of this, see Jason Hickel’s book Less is More.) At its conception, capitalism, just like feudalism, was a means to enable the accumulation of wealth by an elite through exploiting the least powerful in society.
Martin Wolf’s view of capitalism was that there isn’t much fundamentally wrong with it; rather that capitalism was born into democratic systems that have not evolved far enough away from their origins as oligarchies, resulting in the extreme inequalities that we see today. At one point in the programme, he talked of his opposition to the rise of ‘rentier capitalism’ and his description of it seemed remarkably close to the first part of Kate Raworth’s definition of capitalism (see above). So clearly there is significant overlap in what Kate Raworth and Martin Wolf recognise as problems with capitalism and it would have been illuminating to hear a more nuanced critique of Kate Raworth’s definition by Martin Wolf, rather than what seemed like a reactionary rejection of it.
So much for their differences on what capitalism is, what about the fixing the problems it generates? Kate Raworth noted that capitalism has never had an explicit goal – maximising GDP growth has become a de facto goal. She wants our economy to serve the explicit goal of meeting everyone’s needs within the ecological boundaries of our living planet: a goal that is served by the Doughnut economic model. Bernie Sanders concurred, noting that the oil industry knew in the 1970s that it was causing climate change but the goal of growth drove them to lie about what they knew. Martin Wolf didn’t think that the issue of whether or not growth is the goal is as important as people think it is and he postulated that the only way to ‘stop growth’ would be a worldwide dictatorship. He believes that countries should find ways of meeting everyone’s needs by modifying the existing capitalist framework on a country-by-country basis, appearing to cast doubt on the idea that the international community could cooperate to improve the world’s economic framework. Bernie Sanders and Kate Raworth both saw promise in employee company ownership, with wider motives than simple profit, but Martin Wolf doesn’t see much future in it, believing that existing experiments have shown that such companies only grow slowly. But I think that is the point! The goal would not be maximising growth (maximising profits) but meeting the financial needs of the employee/owners without damaging the planet.
The final words went to Martin Wolf who said that the current climate crisis would not be fixed by modifying the economy but could only be fixed with technology – though I do think I could hear Kate Raworth grinding her teeth! There’s a whole other programme to be had in that closing remark, but I will remark that it is typical of the hubris of mainstream economists that they would have us get out of their frying pan by jumping into the fire.
BBC Radio 4 is to be congratulated on an excellent programme which provided a rare space to question some of the fundamental tenets of capitalism – such as the role of GDP growth – which are otherwise unquestioningly accepted elsewhere in its output.
Bernie Sanders is the senior United States senator from Vermont, a seat he has held since 2007. He is the longest-serving independent in U.S. congressional history.
Kate Raworth is an economist advocating a complete change in the way we do economics. She is the creator of the Doughnut model of economics.
Martin Wolf is the Chief Economics Commentator at the Financial Times.