The Cruel Edges of Capitalism (1994)

From the December 1994 issue of the Socialist Standard

Capitalism, the argument goes, is not such a bad system. Since Marx’s day it has reformed itself to provide a tolerable existence for workers: Workers used to have to make provision for unemployment, sickness and old age out of their wages. Now these are provided for them by the state, largely out of taxes levied on the rich. Every time that profit-seeking by private capitalist firms has threatened to get out of hand and damage the environment or the workforce’s health the state has intervened. Over the years more and more restrictions — the prohibition of child labour, the provision of free education, and numerous Acts laying down standards for housing, sanitation and town planning — have been placed on the freedom of action of capitalist firms The bureaucracy to enforce this has again been paid for out of taxes that have reduced the wealth of the rich. All this has meant that workers are reasonably satisfied and don’t want to get rid of capitalism. In short, the argument goes, reformism has worked in the past, so why not continue with it?

This was the theme of a lecture given in the House of Commons in November last year by J. K. Galbraith, the American writer and economist, to the Institute of Public Policy. These developments, he said, have “taken the cruel edge off capitalism” and made it “an acceptable economic system”. Those he called the “social left”, he concluded, should draw the lessons from this:

  “We are no longer in search of an alternative economic system. Nor is it clear that one exists. We are concerned with making more effective and more tolerant and equitable the economic system we have. Our claim is not to violent change, certainly not to revolution. It is to a socially better performance by the existing system ” (Guardian, 25 November 1993).

Following Tony Blair’s election as leader of the labour Party in July, David Marquand echoed this view. The only realistic choice today, he said, is not between capitalism and socialism but between two kinds of capitalism which he called “free market capitalism” and “social market capitalism”. (The World Tonight, BBC Radio 4, 27 July). As a Labour defector to the now-defunct SDP, he favours the latter form of capitalism by which he means the profit system mitigated by a few social reforms and limited state intervention.

So, should we lower our sights and try to make the best of capitalism? Has capitalism become an acceptable economic system that we should try to merely humanise, not abolish?

Only a die-hard reformist could choose the present moment to argue this case. On the world scale, capitalism is still going through one of its regularly-occurring slumps (which, incidentally, reformists once claimed to be able to eliminate). The resulting increased competition on the world market is forcing all states and their governments to cut back on their social spending and to de-regulate the restraints on profit-making by capitalist firms. In other words, the measures which the reformists see as having taken the “cruel edge” off capitalism are being undermined — and undermined by the normal workings of the capitalism they see as the only possible economic system.

Capitalism has rolled back their reforms and all they can recommend is that we start again. That we begin to push the stone back up the slope, even though we know that in the by no means certain event of success it will roll back down in the next slump. In Ancient Greek mythology that was the torture imposed on an unfortunate king called Sisyphus. Galbraith, Marquand, Blair and the others may be masochists. But we Socialists, we are not. We don’t regard endlessly rolling a stone up a hill only to see it roll down again time after time as a useful or satisfying activity.

When these people say we must accept that there is no alternative to capitalism what they are saying is that we must accept that the only way in which the production and distribution of wealth can be organised today is on the basis of production being in the hands of separate firms all competing to sell their products on the market at a profit.

Their whole strategy is based on accepting that profit must be the motive for production and that profits should be made, and then taxing away some of these profits for socially-desirable purposes. But this limits their field of action considerably. It means they must refrain from doing anything that might undermine profit-making.

They must allow the profit-seeking private firms that will continue to dominate economic activity the leeway they need to pursue maximising their profits. They must discourage, and actively oppose when it occurs, workers going on strike for higher wages or better working conditions as these cost firms money and eat into their profits. But, more serious since taxes are central to their strategy, there are definite limits as to how far they can go in taxing profits. They must not kill off the geese that lay the golden eggs by increasing the tax burden unduly — and they must defer to the judgement of the geese, the capitalist firms themselves, as to what level of taxation is due and what undue.

Under these circumstances you need a microscope to tell the difference between “social market capitalism” and ordinary capitalism, which is largely only window-dressing anyway.

It is clear that, given the profit system, only a limited amount of money is ever going to be available for social measures especially those aimed at achieving a fairer, less unequal society rather than linked to increasing the productive efficiency and so profit-producing potential of the workforce.

It is also clear that when, as at present, profits are under pressure from competition from abroad then the amount of money available for state benefits is going to be squeezed. So that, far from the government being able to increase social spending, it has to reduce it. This of course is what has been happening in all countries since the early 1970s when the post-war boom came to a final end and is the practical disproof of the reformist theory that the cruel edges of capitalism can be permanently removed. 

Adam Buick