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Capitalists Can’t Save Us From Capitalism

From Otto von Bismarck to Joe Biden, capitalist politicians have tried to cure the system’s ills without transforming society. But it takes socialists to really change the world for the better.

Joe Biden at the 2019 Munich Security Conference. (Kuhlmann/ MSC/Wikimedia Commons)

Liberalism claims to be a universal political system. Whatever organizational challenge the state faces, liberalism offers a toolkit of solutions which it promises are adequate to any historical period or location. The free market, individual rights, and representative government constitute the ideology’s holy trinity.

This harmonious vision overlooks the fact that the market undermines the practical realization of individual rights. By producing structural inequality in which vast swaths of the population are trapped, capitalist markets deny the impoverished the opportunity to exercise the freedoms it promises them. Also neglected within the liberal worldview is the extent to which the beneficiaries of economic exploitation can capture representative government and put it to work in service of capital accumulation.

Liberalism’s fundamental problem is that it is anchored to an economic system that creates pathologies which it has no means of solving. To overcome the crises which capitalism creates, liberalism has often needed to resort to non-liberal means. The recent wave of economic interventionism across the countries of the global North in response to COVID-19 is the ideology’s latest attempt at self-preservation through adaptation.

It was the conservative German chancellor Otto von Bismarck who first introduced the social welfare systems that are, in a diminished form, still commonplace across the developed world. Between 1883 to 1889, Bismarck introduced health and accident insurance programs alongside old-age pension and disability protections into Germany. The aim of these reforms was, according to Kaiser Wilhelm I, to “take the wind out of the sails of Social Democracy.”

Bismarck was not a liberal. He was an imperialist, nationalist, and conservative, but he understood statecraft and knew the stability of nations was dependent on their ability to maintain their legitimacy by preventing social disintegration. Creating a welfare state worked to forestall the rise of challengers, such as socialists and trade unionists, who sought to radically remake the national order.

The Chancellor’s liberal successors have similar aims. Like the socialists of nineteenth-century Germany, we must recognize both the opportunities and limits posed by the New Bismarcks.

Bismarck and His Heirs

In his 1964 Massey Lectures, The Real World of Democracy, political theorist C. B. Macpherson surveys liberal democracy, communism, and “Third-World” democracy. Against the idea that the liberal state became a welfare state as “the result of the extension of the franchise,” he argues:

The extensive provision of social services would have come anyway, apart from the democratic franchise. It would have come from the sheer need of governments to allay working-class discontents that were dangerous to the stability of the state.

The crises of the twentieth century ushered in plenty of state reforms which matched Bismarck’s in terms of scale and ambition. In the United States, during the Great Depression, President Franklin Roosevelt undertook the New Deal to reign in industry and capital and support Americans made destitute by market failures. In the closing hours of the Second World War, the victors created the Bretton Woods system to manage an increasingly globalized, interdependent, and financialized world.

A portrait of Otto von Bismarck, painted by Franz von Lenbach in 1890. Walters Art Museum / Wikimedia Commons

Decades later, during the 1970s and 1980s, the logic of state self-preservation shifted as presidents and prime ministers in the global North took up the cause of deregulation and tax cuts. Neoclassical economists claimed that these reforms would lead to economic growth for everyone.

Culminating in neoliberal orthodoxy under Reagan and Thatcher, these free-market reforms have been dominant for decades, precipitating economic and political crises in the 1970s, 1980s, 1990s, and the global financial crisis — the Great Recession — of the late 2000s. Most recently, the G20, a forum for international economic cooperation, convened to ensure international financial stability and protect against future meltdowns. The major players from the G20 are the very same elites and financial apparatchiks that the Great Recession caught by surprise.

Today, worries about a global democratic recession form the backdrop to a rise in populist authoritarian figures, weak or stagnant wage growth, anti-globalization pushback, sagging trust, and the climate crisis. On cue, the New Bismarcks have arrived offering a kinder, gentler liberal orthodoxy that still presupposes political democracy without economic democracy. The New Bismarcks insist on the need for the private market model to persist more or less as it is, buttressed only by new decoration — ad hoc or refurbished social programing, targeted investment strategies, and regulation.

A Kinder, Gentler Capitalism

In the United States, Joe Biden has taken up the Bismarck mantle with a climate strategy influenced by the Sunrise Movement and support for the PRO Act. In Canada, Justin Trudeau plays the same role, with carbon pricing, the Canada Child Benefit to address childhood poverty, and recent childcare agreements in a handful of provinces.

His finance minister Chrystia Freeland’s spring budget was replete with spending commitments designed to blunt the sharp edges of life under market capitalism. It includes increases in Old Age Security, a $15 federal minimum wage, and funds for a “green” recovery.

As Trudeau and his party prepared for a fall election, a new name appeared as a possible future Liberal candidate or even leadership contender. Mark Carney, former governor of the Bank of Canada and the Bank of England, emerged to represent the future face of capitalism. Carney has made rounds promoting his new book, Value(s): Building a Better World for All, which argues for a change in how we think about markets. Carney is calling for a shift from a focus on “market societies” to market economies. The latter are backed, in his view, by values such as fairness, inclusion, resilience, solidarity, compassion, and sustainability.

Such values, argues Carney, are not just of intrinsic worth, but will protect us and our planet now and in the future. He surveys past and present crises including the global financial crisis, the COVID-19 pandemic, and climate change to assess where the market went wrong and offers a comprehensive plan for getting things right next time around.

Mere market “value” in the form of profit will not sustain us — in fact, rampant marketization works to decouple us from human values. It is in the interest of firms to recognize this, given that the instability caused by climate change threatens profits as well as lives. Carney’s efforts read as a good-faith attempt to get things right, but his undertakings fall into an old trap.

Recent years have seen a limited but notable rise in the popularity of socialism. In the United States, the popularity of self-identified socialist Bernie Sanders coincides with the rise of left-Democrats in Congress and the growing popularity of the Democratic Socialists of America.

The contemporary popular North American understanding of “socialism” focuses less on who owns the means of production and more on government intervention in economic life to support people. Consequently, the word “socialism” has become more mainstream and accepted. At the same time, the way we understand the word has become decoupled from its original and sharper meaning and is closer now to social democracy. Nonetheless, capitalists are noticing the shift, just as they notice the structural crises generated by the market.

Making the Reforms of the New Bismarcks Count

The New Bismarcks seek to head off socialist progress — they recognize that it may threaten the liberal order. As well-meaning as they may be, their fundamental flaw is their belief that the market can solve the problems it has created, just as their conceit is that they know how to make sure it does. The measures they propose — extending modest state support to those who need it and blunting the market’s sharpest edges — are welcome insofar as they further efforts to mobilize populations for economic justice.

Ultimately, however these measures are insufficient, and they always will be. Market logic is market logic; capitalism is premised upon the private ownership of the means of production, the extraction of wealth from workers, and its concentration in the hands of capitalists. Profit is the point; more is always better.

The rules, formal and informal, that make the private market possible ensure that those who can extract wealth from workers and the state will maximize the amount they can accumulate. This impels production (and consumption), for the sake of accumulation, by whatever means is most effective at producing goods as cheaply as possible — especially when it comes to labor costs.

It also means externalizing as many liabilities as possible, ensuring the commodification of its own fixes. For instance, Carney exerts considerable energy discussing ways in which the market can address climate change. Of course, this is the self-same global market that enabled 100 fossil fuel companies, state and non-state, to produce “nearly 1 trillion tonnes of greenhouse gas emissions” — more than seventy percent of the emissions since the late 1980s.

It is also the same market that has just now, far too late, begun to accept insufficient, market-based remediation such as carbon offsets and carbon pricing within the flawed and insufficient paradigm of net-zero. This is not a market that will cede its hegemony.

The problems created by the free market — such as exploitation, extraction, externalization, monopoly, and colonialism — are not a closely-guarded secret. Adam Smith recognized many of them in the eighteenth century and Karl Marx anatomized them in the nineteenth. Attempts to restrain and reform the free market within the capitalist paradigm, and to undermine socialists and communists who seek to remake the system, have been around for centuries now.

Over the course of the twentieth century, we have seen important life-improving and life-saving reforms, but the fundamental problems of inequality, exploitation, and environmental catastrophe have remained. These problems now exist on a global scale. Why will a market fix work now? Why should this time be any different?

Despite the best wishes and intentions, genuine or cynical, of a few, it is simply not going to happen — not in any substantive way, at least. It won’t because it can’t.

The logic of the free market — exploitative, extractive, externalizing, monopolistic, colonial — is not a bug, it’s a feature. A kinder, gentler capitalist market based on more constructive values would cease to be a capitalist market.

Despite Bismarck’s efforts, socialists and trade unionists in Germany continued to gain ground after the chancellor introduced welfare programs. In this century, we must ensure that the reforms of the new Bismarcks have similar effects. Liberal reforms should mark the beginning of wider, structural changes that will upend capitalism and usher in economic democracy, shifting power from the few to the many.

Only radical socialist political and economic reforms, buttressed by participatory democratic institutions, are sufficient to address inequalities of wealth and power, democratic decline, and climate change. These transformations will have to come about alongside — sometimes in partnership with, sometimes in tension with — electoral politics.

We should not reject efforts at the ballot box as we struggle to introduce new institutions, practices, and norms. The work of respecting, realizing, extending, and upholding the values that the New Bismarcks claim to support but can neither achieve nor uphold demands a suite of strategies and sites of engagement. We must springboard from their reforms while protecting ourselves from being outflanked on the Left by these stewards of the liberal order.