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Should we be anxious about the future of capitalism?

The Economist

There has been no shortage of serious-sounding warnings about the profound threats to capitalism in recent years. I would know. I’ve written some myself — including for this website.

You don’t have to look far to find cause for alarm. In the UK, the opposition party is run by a far-left cabal whose stated goal is the overthrow of capitalism. In the US, the Democratic Party is hurtling leftwards at a pace that would have been unimaginable not so long ago.

Poll after poll across the West finds dwindling support for free enterprise and reveals that socialism is not the boo word it once was. Some of the biggest winners from the economic status quo, like hedge fund billionaire Ray Dalio, worry that a revolution is around the corner.

The paradox of recent economic history is that the post-2008 crisis of confidence in capitalism in the West has coincided with huge strides forward elsewhere — huge strides that are largely the result of economic liberalisation. While we were busy panicking, hundreds of millions were using the system that had us so worried to escape poverty and destitution.

The dire failure of those moving in the opposite direction, like Venezuela for example, only underlines the conviction among capitalism’s supporters that the overwhelming weight of evidence is on our side. And that only adds to the frustration when, closer to home, we seem to be losing the argument.

Reassuringly, however, this paradox is nothing new. I was reminded of that fact reading The Anxious Triumph, Donald Sassoon’s new global history of capitalism from 1860 to 1914, this summer. As Sassoon explains, it was between the second half of the 19th century and the start of the First World War “when capitalism triumphed and became universally accepted, when most of its opponents acknowledged that it was inevitable, perhaps even desirable”.

He tells a complicated but compelling story of laggards and pathbreakers striving for economic progress. Then, as now, this was an uneasy process, and capitalism was prone to crisis. Then, as now, capitalism delivered huge boosts to living standards. Then, as now, capitalism was unpopular.

The book is unwieldy and off-the-wall, often frustrating and occasionally brilliant. Organised thematically, it jumps backwards and forwards between centuries and from one continent to another. Sometimes it is disorientating, sometimes it is incisive.

Sassoon, Emeritus Professor of Comparative European History at Queen Mary, is hardly a dyed-in-the-wool free marketeer, and Anxious Triumph is by no means a celebration of capitalism. There are frequent swipes at neoliberalism, free-market ideology and “untrammelled individualism”.

Given Sassoon’s resistance to any universally applicable set of rules and institutions that history shows to deliver prosperity, the book doesn’t fit easily into a particular box. And those with pro-market instincts will find plenty to be frustrated by, not least the emphasis Sassoon puts on a strong state and taxation (as well as a dig at Ayn Rand). But to this laissez-faire reader, the big-picture lesson from Anxious Triumph is an encouraging one, and all the more so for the fact that its author likely disagrees with me on quite a lot.

Sassoon understands that capitalism is so much bigger and so much harder to pin down than most people realise. For instance, contrary to the claims of many on the modern left, “capitalists do not control capitalism. They are themselves prisoners of a set of social and economic relations within which they try to improve their position against their competitors”. Similarly, the gains of movements we think of as capitalism’s biggest opponents have only cemented the system’s position at the top.

Consider, for example, the labour movement. As Sassoon writes:

The labour movement was usually regarded as the main opponent of capitalism. Yet it was a creature of capitalism: no capitalism, no workers. It was almost always a reformist movement against the harsher manifestations of capitalism, such as long hours and low wages, but not necessarily against the system per se. As wages increased and conditions improved, enmity against capitalism subsided, without ever disappearing. Trade unionists, wearing their trade union hats and not their revolutionary berets, were ready to accept capitalist relations and even profit-making as long as workers obtained their ‘fair share’.

Throughout, Sassoon describes a system bigger than the day-to-day fight over politics and economics. Modern capitalism, he writes, is “a human system that rests, apparently, on the accumulation of a mass of individual decisions”. As a result, “it creates losers and winners by constantly innovating. This chronic instability is the foundation of its advance, not a fault in the system or an incidental by-product”.

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