Capitalism and Its Critics by John Cassidy — lessons from the global economy’s ‘permanent revolution’
A well-researched A to Z of capitalism’s most influential commentators from one of the world’s leading economic writers
Martin Wolf
Polish-German philosopher and economic theorist Rosa Luxemburg gives a speech during the International Socialist Congress in Stuttgart, 1907 © AlamyJohn Cassidy, a British-American staff writer at the New Yorker, is one of the world’s leading economic journalists.
He is also the author of Dot.con, which examined the dotcom bubble of the late 1990s, and How Markets Fail, which illuminates the origins of the great financial crisis of 2007-08.
In his latest fascinating (and lengthy) book, Cassidy tells the stories of some of capitalism’s most interesting and influential critics since the 18th century.
This turns out also to be an illuminating way to tell the story of capitalism itself, the juggernaut that has continually reshaped our world.
Cassidy’s “critics” appear chronologically.
He starts with the colonial monopoly capitalism of the East India Company, as seen through the critical eyes of William Bolts, a disgruntled employee of the company in the 18th century.
It ends with contemporary alarms over inequality, financial crises, pandemics, wars, climate and artificial intelligence.
Some, he notes, label this a “polycrisis”.
Some, as so often before, also predict the end of capitalism. Others merely hope for it.
What, then, is “capitalism”?
We can define it, says Cassidy, as “any market-based economic system in which the means of production were owned by private proprietors” who hired managers and workers.
It sounds so simple.
But this system, uniquely, delivers perpetual revolution.
Cassidy’s critics are strikingly heterogeneous.
Some, for example, are famous radicals, notably Friedrich Engels and Karl Marx.
Almost equally celebrated is Rosa Luxemburg, who was killed just after the end of the first world war.
Yet Adam Smith also makes a somewhat surprising early appearance as an opponent of mercantilism, monopolies and joint-stock companies.
Far later Milton Friedman and Friedrich Hayek appear, for their opposition to the Keynesian version of managed capitalism.
Others, again, are famous reformers.
John Maynard Keynes is one such.
Falling between reformer and radical critic was the brilliant Joan Robinson, one of Keynes’s most remarkable pupils.
Many are protesters against injustice.
One is a group of whom almost everybody has heard — the early 19th century Luddites.
Others again were proponents of co-operative socialism.
Among the stories he tells are those of women fighting for political, economic and social equality: Anna Wheeler, Flora Tristan and Silvia Federici, who argued for wages for housework. Other important 19th-century figures he discusses are Thomas Carlyle, Henry George and John Hobson.
The great crisis of the first half of the 20th century brought forth (in addition to the work of Keynes) two path-breaking books, published in 1944.
One, The Road to Serfdom, by Hayek, argued that socialism had led to the dictatorships — and would do so again.
The other, The Great Transformation, by Karl Polanyi, argued, au contraire, that the global free market had itself led to the authoritarian and collectivist reaction.
Further critiques of market capitalism, especially its global form emerged in the second half of the 20th century and early part of the 21st.
One was the anti-Keynesianism of the left, notably the ideas of Paul Sweezy, an American Marxist, and the Polish economist Michał Kalecki.
Kalecki discovered Keynesian ideas in the early 1930s, but later argued that capitalists would come to reject full employment policies, which reduced their political and economic power.
Dependency theory, which argued that full integration into the capitalist world economy could only reinforce poor countries’ underdevelopment, was another current.
These theories were particularly strongly held in Latin America.
Samir Amin, a Marxist of Egyptian origin, held similar positions.
The Nobel-laureate Joseph Stiglitz and Dani Rodrik, originally Turkish, advanced some not dissimilar arguments.
Another novel critique was environmentalism.
Cassidy refers to JC Kumarappa, who advised Mahatma Gandhi, and Nicholas Georgescu-Roegen, Romanian-born founder of ecological economics, who argued it would not be enough to halt growth: output and consumption had to be radically reduced.
Eric Williams and Stuart Hall were both of West Indian origin.
The former made seminal contributions to an old argument, namely that slavery had accelerated the industrial revolution; the latter sought to explain the failure of traditional leftwing politics to halt “Thatcherism”.
Cassidy’s final figure is Thomas Piketty.
Piketty is not a Marxist.
But his work on inequality has had an enormous impact in bringing the Marxist idea that capitalism inevitably increases inequality back to life.
Cassidy’s well-told and well-researched stories lead to three overarching lessons.
The first is, in Cassidy’s words, that “the central indictment of capitalism has remained remarkably consistent: that it is soulless, exploitative, inequitable, unstable, and destructive, yet also all-conquering and overwhelming”.
The second lesson is one of continuity: it is, again in Cassidy’s own words, that: “From its earliest days, industrial capitalism has zigzagged between periods of prosperity, when it seems all-conquering, and episodes of panic and contraction.
Indeed, it is barely hyperbole to say that capitalism is always in crisis, recovering from crisis, or heading toward the next crisis.”
The third lesson is that of capitalism’s protean mutability.
Cassidy describes the “various iterations” of the system, “from the rise of factory production, to the switch from sole proprietors, to large corporations as the dominant form of capitalist enterprise, all the way up to the digital revolution and its latest offshoot, the commercialization of artificial intelligence”.
The prediction that capitalism would perish in unmanageable economic and social crises has yet to be borne out, Cassidy notes.
This is partly due to a factor that few foresaw: “the rise of big government”.
More broadly, the politics of capitalist societies have mutated, from aristocracy and autocracy to democracy, from imperialism to decolonisation, from the “nightwatchman state” to the welfare state, and from laissez-faire to interventionism.
What comes next for capitalism?
The obvious point is that it is now going through another set of upheavals.
The rise of autocracy seems to be breaking what seemed just three decades ago to be a strong marriage between capitalism and democracy.
This domestic transformation, notably in the US, is driving the collapse of the liberal global order and the disintegration of the historic alliance of western democracies.
Alongside the swift erosion of the liberal order is coming a huge shift in the global balance of power.
Moreover, the most important rising power in the system is neither capitalist nor democratic, but rather a hybrid of communist and capitalist.
The combination of these two transformations is threatening the very survival of the globally integrated economy created during the previous decades of market-led globalisation.
At the same time, some of the crises capitalism now confronts, notably those over the global environment, are ones that capitalist societies, with their promise of ever-rising prosperity, are doomed to find politically difficult to manage.
Donald Trump intends to deny their existence.
Finally, as so often before, technological change — this time, the development of artificial intelligence — heralds huge changes in economic and political life.
Not least, the capitalists who own these new means of production do not need to employ more than a handful of people.
They bear little or no responsibility for any of the outcomes.
Some, notably the German economic sociologist, Wolfgang Streeck, insist that this time is different: capitalism will end.
Cassidy rejects such pessimism.
“But”, he concludes, “the system cannot rest.
This has been true throughout its history.
It will remain true until . . . Streeck or one of his descendants is eventually proved right.”
My view is much the same.
Capitalism’s “permanent revolution” will continue.
Exactly how it does so is, as so often before, obscure.
But the main reason it will survive, however changed, is that there remains no good alternative.
Capitalism and Its Critics: A Battle of Ideas in the Modern World by John Cassidy Allen Lane £35/Farrar, Straus and Giroux $35, 624 pages
Martin Wolf is the FT’s chief economics commentator and author of ‘The Crisis of Democratic Capitalism’
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