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Is it Time to Bury Capitalism?

10/10/2014 14:14 BST | Updated 09/12/2014 10:59 GMT

One of the things all creatives can agree on is that you never know what's round the corner. That uncertainty can be a boon and a curse. The trade off for not knowing where your next pay cheque is coming from is the excitement of a life that could take you anywhere. One week you can be directing a music video with a BBC News camera crew looking over your shoulder, the next you can be sat in the offices of a well-respected production company discussing the state of the global economy as part of a drama television series pitch.

George Osborne has recently warned that the UK will not be immune to the impending global economic slowdown. Surely we've got to pull our heads out of the sand and take a serious look at the merits of capitalism when so many economies are teetering on the edge of collapse. Particularly after one of the longest periods of widespread peace and prosperity in world history. If capitalism cannot serve us in the good times, why should we trust it in the bad?

An Indictment of Capitalism? Inside Job

When the Berlin Wall fell, it signalled the supposed death of socialism, and the world was rid of the primary competing ideology to capitalism, which has since reigned triumphant. In the minds of many, capitalism had proven itself against the ravages of the Cold War and could rightly be regarded as the only viable economic system. Now, we accept rampant capitalism without remark. When journalists write about the economy, the assumption is made that growth is good, a slowdown is bad. Capitalism demands consumption as a measure of success, but all of us know that if we consume indefinitely, we become bloated and grotesque.

What good is growth if 90% of the economic benefit of that growth is concentrated in the hands of 1% of the population? What use is growth if a nation is becoming ever more indebted? In his book Capital in the Twenty-First Century, Thomas Piketty argues that capitalism inherently creates social inequality. And, as we see the rise of a class of ultra-rich individuals in virtually every supposed free-market economy around the world, it is hard to argue with Piketty's conclusion.

One of the problems with capitalism is that it makes no qualitative judgments about social benefit - the free market must be the arbiter of all that is good.

That would be fine, were it not for the fact that a truly free market cannot exist. Markets are inherently flawed. Free market economics makes tremendous sense on paper, but as a theory it takes no account of the wide and wild variety in human nature. There is no such thing as a truly free and efficient market economy in existence in the world today. All market economies come with a legacy of laws, practices, tax regimes, incumbents, and relationships that skew the field. Some governments say they try to regulate against unfairness, but individuals and organisations with funds can hire the same lawyers their government uses to draft its laws. They can engage the services of lobby groups and publicists to ensure that their interests are protected or enhanced. That's why Starbucks can get away with paying less corporation tax than any of the little family run cafés that it might have driven out of business. They may not make the best coffee, but Starbucks can afford to hire the best lawyers and accountants.

Even if the market was truly fair, human beings are not. We are programmed by millions of years of evolution to seek the most efficient way of doing things. We are competitive, and some of us can be downright destructive, in the quest for success. Given any set of rules, a significant proportion of the population will try to find a way around them.

Capitalism enables those with burning ambition, psychopaths with no conscience, and the unscrupulous to thrive. Nations can be brought to the brink of bankruptcy by a few hundred highly paid zealots in suits, who believe they can create wealth from nothing. If capitalism could almost destroy itself during a period of tremendous prosperity, then why do we continue to regard it as an inherent good?

Economists who give free market capitalism credibility are doing society a disservice. Politicians and big businesses cite such economists when they argue that economies fail because markets are not free enough. This can often be a ruse to force through a new round of deregulation that serves the interests of a particular corporation or group. Even now some people try to argue that the financial collapse of 2008 occurred because markets had not been liberalised enough.

The truth is the financial collapse of 2008 can be directly linked to the repeal of the Glass-Steagall Act, which ended the separation of retail and investment banking in the US. The Act, which was passed as a result of the Great Depression, recognised that retail banks were custodians of people's hard earned money, while investment banks were risk takers, and it required them to be separate entities. When Glass-Steagall was repealed in 1999, as a result of a campaign for lighter regulation of Wall Street, the very behaviours that led to the Crash of 1929 were legal once more. The market did not, as those who had advocated the repeal of Glass-Steagall promised, regulate itself. In fact, the entire global economy suffered because of lighter regulation. The free market may be a theoretically optimal model, but it is not the optimal model for the real world where there is greed, dishonesty, vested interest and corruption.

In its modern form, greed underpins capitalism. Greed may be good on an individual level because it enables us to compete and ultimately survive. But facilitating greed as the ultimate ambition of a society can only be destructive, as the individual will seek to enrich his or her self at the expense of the general population. We're all still paying for the private jets and yachts of those who got rich during the false boom of the early 2000s. Those free marketeers were glad of state intervention when it came in the form of multi-billion pound bail outs.

We should all be very concerned that the Bank of England has decided to hold interest rates at 0.5%. It's the surest sign that despite record bail outs by the state, printing vast quantities of money, state aid for the property market, and a raft of other measures, the UK economy is still precarious.

If we are ever to have a hope of rebalancing the books, meeting the future costs of the NHS, and satisfying our pension liabilities we need to look beyond capitalism. It's served a fortunate few well, but it has failed the majority. It's time to bury it alongside socialism and look for a better successor to both.