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The Locust and the Bee
Predators and Creators in Capitalism's Future
By Geoff Mulgan PRINCETON UNIVERSITY PRESS
Copyright © 2013 Princeton University Press
All rights reserved.
ISBN: 978-1-4008-6619-9
CHAPTER 1
After Capitalism
ONLY A FEW YEARS AGO the question of what might come after capitalism appeared to have been permanently parked, deemed about as sensible as asking what would come after electricity or after science. Capitalism looked unchallenged. Global markets had pulled China and India into their orbit. The medievalist fringes of Islam and the ragged armies that surround global summits jostled to be capitalism's last, enfeebled, challenger. Multinational companies were said to command empires greater than most nation-states, and in some accounts had won the affiliation of the masses through brands, with Coke, Nike, and Google displacing the red flag and the raised fist. Religious institutions were being transformed into highly profitable enterprises, marketing a flood of multimedia products to the faithful. Communist leaders were mutating into investors and entrepreneurs in the booming cities of Shanghai and Shenzen. Nature was being privatized, whether the DNA of rare insects or the rain forests of South America, and mining was advancing from the land to the oceans, and then to space.
That China had doubled its GDP in ten years, a task that took the United States more than forty years to accomplish in the twentieth century, and Britain more than fifty years in the nineteenth, suggested a global economy undergoing dramatic acceleration, and a system so superior to its competitors that all argument was closed.
There remained no shortage of dissatisfied and skeptical opponents. But the serious dissidents and critics were marginalized. Fidel Castro, embargoed on his island, was growing old, sick, and irrelevant, Ayatollahs in Qom in Iran had tried and failed to export their alternative in the 1980s and were now losing the battle for the hearts and minds of their young people, who were secretly partying in the suburbs of Teheran. The counterculture that had challenged capitalism in the late 1960s, offering love, peace, and authenticity, had been largely co-opted into a business ethic of open shirts and jeans, carefully allied with ruthless attention to the bottom line. It seemed that the war was over, and that capitalism had won.
Yet the lesson of capitalism itself is that nothing is permanent: "all that is solid melts into air," as Karl Marx had put it. Within capitalism there are as many forces dynamically undermining it as there are forces carrying it forward. Creative destruction is its nature, not an unfortunate side effect. We cannot easily predict what capitalism will become. But we cannot sensibly pretend that it will continue forever.
For most of the 170 years that the term capitalism has been in use, it has been accompanied by furious debate about what it might evolve into. Utopians offered elaborate descriptions of what a future society might look like, without money or profit. Theorists showed how capitalism was just a phase in humanity's evolution—like feudalism, a necessary staging post but not one you would want to be stuck in.
That debate went largely silent after 1989. If part of the reason was capitalism's apparent triumph, the other was a failure of theory. The year 1989 marked a victory for economics over sociology and for the claims of the market as a vehicle for human progress. Yet although the intellectual tools of economics are good at explaining how non-market economies might become capitalist, and even better at explaining how change happens within markets through the rise and fall of businesses, sectors, and technologies, they offer little guidance as to how a capitalist market economy itself might evolve into something different.
My aim in this book is to provide tools for thinking about capitalism as a system in motion, rather than one which, in its fundamentals, has come to a stop. I began writing it at the high point of market euphoria in 2007, and continued through the crisis that began the next year and still shows few signs of coming to an end.
My main message is simple. Capitalism at its best rewards creators, makers, and providers: the people and firms that create valuable things for others, like imaginative technologies and good food, cars and healthcare which, at their best, delight and satisfy. Its moral claim is to provide an alternative to the predatory, locust-like tendencies of states and feudal rulers. It rewards the people who work hard and innovate, the human equivalents of industrious bees, and by doing so makes everyone better off, more than any other economic system in human history.
But capitalism also rewards takers and predators, the people and firms who extract value from others without contributing much in return. Predation is part of the everyday life of capitalism, in sectors as mainstream as pharmaceuticals, software, and oil, where people's money, their data, their time, and their attention are routinely taken in fundamentally asymmetrical exchanges. It's commonplace in the behavior of slum landlords and loan sharks, in pornography, and prostitution. Beyond the boundaries of the law, organized-crime syndicates extort hard-earned money and fuel addiction to drugs. Within the law, a large proportion of financial activity exploits asymmetries to capture rather than create value, and over the last twenty years that proportion rose, as capitalism shifted the balance of returns away from production and innovation and toward speculation.
These problems aren't new. The historian George Unwin attributed the failure to turn the dynamic invention and entrepreneurship of sixteenth-and seventeenth-century England into an industrial revolution to "the feverish delusions of speculation and the selfish greed of monopoly" that overshadowed honest enterprise and sucked resources away from new technologies and manufacturing. Adam Smith was acutely aware of capitalism's dual character, and wrote extensively about the temptations to collusion and exploitation that can be found in markets. Two centuries later, some of the sharpest thinking in modern economics has grappled with the complexities of "economic rent" and predatory behavior, and why these seem to be amplified in economies based much more on information and knowledge. Political scientists also have shown the ubiquity of predatory behavior, and have shown that the tension between productivity and predation explains much about the uneasy politics that has always surrounded capitalism, and why the liberal dream of markets left to govern themselves turned out to be a chimera.
Yet much writing about the economy, and capitalism, is either ignorant or oblivious of these tensions. The critics of capitalism are blind to its creativity, while its complacent advocates resist any suggestion that the system might sometimes reward predation, or that the creation of value for some might destroy it for others.
All over the world, the dramatically widening asymmetries of power, wealth, and reward that have accompanied the shift to economies based on information and knowledge have left societies richer but also stretched and uncomfortable. Capitalism has never been as creative as it is now. But it has also never been as predatory. The result is a landscape in which politics and economics face radically different challenges to those they faced at the high point of the industrial era, challenges that they find hard to acknowledge, let alone to solve.
No one legislated capitalism. No one planned it. Even the word was invented by its critics and not by its advocates. The capitalism described by Adam Smith has only a tenuous connection to the capitalism of today. Yet capitalism is for all that a common property, part of the world's commons, like literature, science, or the great religions. It is a system with extraordinary power, and we should all be interested in where it is heading. As the English poet Matthew Arnold said of freedom: it is a very good horse to ride, but you have to ride it somewhere.
Modernity has spread many things around the world: the rationality of science; the predictable rule of law; and the messy, but generally robust, forms of democracy. Yet none of these is as controversial or as contested as capitalism, the other system that spread in tandem with them. Capitalism has run into repeated crises of profitability. But it has also run into periodic crises of meaning. Amidst every capitalist economy there are anti-capitalist movements, activists, and even political parties, in a way that there are no longer anti-democratic movements, activists, and parties. There are hundreds of millions of skeptics and cynics, who look with distaste on the bland reassurances of corporate advertising, dissidents in their heads even if not on the streets. For all its achievements in raising living standards, capitalism has, quite literally, failed to make enough sense, not just for the losers, but often for the winners too. For all its success in satisfying what some Africans call the "lesser hunger," the hunger for things, it has failed to satisfy the "greater hunger," the hunger for meaning.
The many crises of profitability that have punctuated capitalism's short history led to compromises and adaptations, mainly with governments, and the crises of meaning too have led capitalism to compromise with its critics to survive. Again and again capitalism has had to be remade, its energies channeled, tempered, and constrained in new ways, whether by the creation of welfare states and public health systems, or by laws that ban the sale of everything from drugs to body parts, unsafe foods to public offices. Sometimes it has tried to adopt its critics' ideas as its own, for example, presenting the corporation as a religion, or as a place where hierarchies are overturned and bureaucracy is rejected. It has presented itself as a force for equity, for saving the environment, and even for solving the world's social problems. Always the challenge has been to make it work, not just in a narrow economic sense, but also cognitively, as a system that has meaning for the people within it.
There are many possible futures for capitalism. Predation could become more aggressive with new monopolies around energy, natural resources, or intellectual property backed up by state power and helped by the shift of capitalism's center of gravity to the east. Capitalism could deepen, turning anything from genes and tunes to the ocean floor into property. With ubiquitous data and networks every fact, however private, could become a commodity in a world where the real and the virtual merge.
But my interest lies in exploring possibilities that align capitalism more closely with life, that help it to enhance, to enrich, and to enliven, and to overcome its deficiencies of meaning and sense. As I show, capitalism has thrived in part because of the radical ambiguity of its defining ideas that offer immense rewards to predators but also offer the chance for everyone to be a creator, a maker, and a provider. Latent within it, I suggest, are radically different ways of thinking about growth, value, and entrepreneurship, as well as love and friendship.
Through the course of the book I therefore set out some of the tools with which we can think and act to bring these to fruition. Methodologically that involves shifting between different scales—from the micro to the macro and back again. The method mirrors what I take to be the pattern of social and economic change, a constant iteration between the specific and the general, as well as between the bottom and the top of societies, the lived world of individuals, organizations, and the world of aggregates.
Crises speed up this to and fro. Institutions and nations respond to crises at first with urgent attention to the symptoms they see before their eyes: the businesses going bankrupt, the workers losing their jobs, or the homeowners being dispossessed. Some never get around to dealing with the causes, which, as I show, often have their roots in overreach by predators and free riders seeking to capture value that they don't create, whether in the form of rising technology stocks, land prices, or cheap debt. But some make the most of crises to heal themselves, dealing with otherwise ignored ailments. Indeed, one of the definitions of leadership is the ability to use the smallest crisis to the greatest effect, and our hope must be that new accommodations will grow out of the current crisis and address some of its fundamental causes.
Yet with much of the developed world facing the prospect of a long period of low growth and stagnant incomes for much of the population, few if any political parties can offer confident accounts of where prosperity, the good life, and good jobs will come from. This failure risks worsening an already toxic level of political mistrust and opening the way toward lurches to populist authoritarianism, and a search for scapegoats rather than answers. The need for political and economic creativity is as pressing as it has ever been.
No one can predict the precise forms new accommodations will take, whether at a global, national, or local scale. But it is possible to sketch the elements they might draw on, and I hope that any reader will by the end of the book have a sense of other possible worlds that are within reach, and of how much our views of what wealth is, how wealth is created, and how wealth should be used, may be transformed.
Chapter 2 sets the scene by describing the crisis that unfolded in the late 2000s, and how it changed the world's political economy. The crisis had its origins, like many others, on the edges of capitalism, in the household sector and land, and in the most dramatically unbalanced parts of the system, before spreading into every other part, freezing the flow of credit in the banks, and then precipitating a cascade of collapses. In retrospect we can now see that the late 1990s brought an historic shift of surpluses away from production and toward finance, which, like any excess of predation, inevitably harmed the vitality of the system being preyed on. Crises can be either barren or fertile. But the sheer scale of the public subsidies and guarantees needed to avert financial collapse, the contradictory results they achieved, and the gravity of the ensuing fiscal and political crises, make it more likely that attention will in time turn from tackling the symptoms to more fundamental reform.
Chapter 3 describes capitalism's origins, and how it has evolved. Capitalism has been defined in many ways, through its rules and laws, through the power it gives to investors and entrepreneurs, and through the flows of money, information, and goods that it supports. I define it as an idea—the relentless pursuit of exchangeable value—that became a form of life. In this sense it is starkly different from social systems that prioritize the conquest of territory, the saving of souls, or the brotherhood of man. But capitalism is a matter of degree. Societies can choose how capitalist they become, how much they extend the capitalist idea into fields such as health or art. All real capitalisms are impure hybrids, mongrels mixed with other strains.
These compromises arise at the intersection of what I call "lived value"—the value of food, homes, cars, or relationships that we experience, and that has a biological basis in our needs for survival and thriving—and the "represented value" of money, stocks, bonds, and credit cards. Value only becomes meaningful within life—in real places and times. But its representations transcend place and time. Capitalism exploded the world of represented value; its power lay in the abstract, universal nature of represented value, and the application of mathematics to so many fields of activity. But its many vulnerabilities also derive from the gap between lived value and its representations, including its patterns of widespread alienation and its vulnerability to crises (which arise when the connection between lived value and represented value is stretched too far).
(Continues...)
Excerpted from The Locust and the Bee by Geoff Mulgan. Copyright © 2013 Princeton University Press. Excerpted by permission of PRINCETON UNIVERSITY PRESS.
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