Recent reads on the future of capitalism

Sun, 14 Aug 2016

I've recently finished two books on a similar theme, Saving Capitalism, by Robert Reich (Bill Clinton's Secretary of Labor), and PostCapitalism by British journalist Paul Mason.  I had read quite a few good articles by each of them, so I was eager to read their books.

If there was a book that I wish everyone would read right now, it would be Saving Capitalism.  Very readable (you don't need an economics degree), and not too long, it highlights the extent to which governments influence how effectively markets work, the last 50 years of changes that have weakened their ability to deliver wealth and opportunity to all, and how the system can be improved.

The book provided a good historical (mostly US) perspective on a range of topics: private property ownership (including patents), constraints on monopoly power, contracts, bankruptcy and law enforcement, the factors that determine the price of labour, the sources of political influence, and the harmful effects of excessive inequality.  For example, this telling insight (which ties into my last blog post):

"Capitalism, alas, depends on trust.  Without trust, people avoid even sensible economic risks.  They also begin thinking that if the big guys can get away with cheating in big ways, small guys like them should be able to get away with cheating in small ways - causing even more people to distrust the economic system.  Moreover, people who believe the game is rigged are easy prey for political demagogues with fast tongues and dumb ideas." 

The thing I particularly liked was that he rarely overstepped the evidence, never put the problems down to one guilty party or action.  He recognised that the current situation was brought about by many people, mostly doing what they were allowed to do, without any sense of maliciousness.  And similarly, he recognised that there is not one single solution, but many things that would all contribute to improving outcomes for all.  So highly recommended.

 

PostCapitalism was a much tougher read.  In essence, it tries to make the claim that the economics behind our market system cannot handle the fact that an increasing proportion of the goods we buy are free to reproduce, and we consequently need a replacement to capitalism.

Unfortunately, the first two thirds of the book consisted of a lot of fairly dry analysis of crisis economics (not just Marx), the history of labour, and the labour theory of value.  Some bits were interesting, but I was lost in places, and often didn't know if I was being told something because it was true, or because I was about to be told it wasn't true.

The final third was much more relevant, including a final chapter that examined how we could bring about a transition towards a system better suited to our new reality (including many of the same suggestions as Saving Capitalism).   But I did wonder how many of its conclusions were dependent on me accepting the first two thirds of the book.

It would be nice to think that over the next year or two, as I reflect on economics required to make markets function, I will start to appreciate just how significant Mason's points are - but unfortunately I'm not there yet.