Introducing Capitalism: A Graphic Guide (Graphic Guides)

by Dan Cryan

Keynes claimed that, while unchecked, capitalist markets go through unavoidable cycles of growth and recession. There is no crucial breaking point of the system as Marx thought, but also no possibility of constant growth.

Inflation is the mark of a heating market, to which the state should respond by reducing the amount of money. This could be done by increasing interest rates, which brings more money into the banks, discourages investors from borrowing and encourages saving.

in the Far East and many parts of Europe, a different kind of capitalism system was used in order to fight the Great Depression: state-regulated capitalism. State capitalism is the idea of combining state-funded projects and state regulation of the market with private ownership and profit-making.

state capitalism can prove to be a more effective way of developing economies and pulling out of depression than liberal capitalism.

In China, where the economy was completely devastated in the last days of the empire, the state capitalist initiatives taken between 1928 and 1949 by nationalist leader Chiang Kai-shek (1887–1975) helped to put it in relative order

Even today, the communist ideology of China masks an increasingly state-capitalistic economic structure, which results in very rapid growth. Moreover, Chiang Kai-shek took his policies to Taiwan in 1949, where they generated an “economic miracle”. Similar methods led to similar results in Singapore, South Korea and even Germany before the Second World War.

Loyal to the Keynesian idea of circulation, the Marshall Plan provided $13 billion in aid to Europe, provided the recipients cooperated in an open market. The purpose of the Marshall Plan was two-fold: to get Europe on its feet again and to resist the spread of Soviet Russia. Of the $13bn, around 90 per cent was a grant that had to be matched by the countries that benefited.

Keynesianism is by no means universally accepted. Economists like the American Milton Friedman (1912–2006) started questioning the importance of government intervention in the economy, leaving aside cases of extreme depression.

The monetarist argument rests on the observation that having more money will change nothing if all prices are adjusted accordingly – if you earn double but everything costs double, you’re at exactly the same position. So if the national bank increases the amount of money on the market, businessmen in the long run will adjust their prices so that overall there is no effect on the economy.

it is unrealistic to expect unemployment to drop below 6 per cent. The national bank should leave it at that and increase the amount of money only at the same rate as the economic growth, more or less.

environmental impact of the Industrial Revolution

culture of consumerism that encourages people to keep spending.

Max Weber (1864–1920) developed his social criticism of capitalism

In The Protestant Ethic and the Spirit of Capitalism (1905), Weber claimed that there was a reason why capitalism did not evolve in Italy or Spain, for example, even though Italy produced the first significant merchant class and Spain the first empire. That reason was the Catholic religion, and not simply the material conditions of the economy.

In the Protestant ethics of the Calvinists and Puritans, things were exactly the opposite. Saving money and investing it rationally was seen as an almost religious duty. It was part of the overall religious project of exercising restraint and rational behaviour in all fields of life. In Catholic countries it was alright to be draped in scarlet velvet, but wrong to be proud of your riches. And if you achieved your wealth through business alone, without having any political power, you’d still have to know your place.

In capitalism, profit becomes the goal of commercial organizations, and their employees and customers are considered as means to that effect. Management experts and campaign managers make their living by constantly supplying the need of organizations for more efficiency from their workers and higher sales from their customers.

For Weber, it should always be remembered that organizations are meant to improve people’s lives, and that means first of all that organizations deal with people, not with data and figures.

During the Great Depression, the rise of fascism instead of the predicted communist revolution brought some Marxist theorists to analyse fascism as the last resort of capitalism, right before its inevitable collapse. These are the origins of neo-Marxist social thought during the 1930s.

For the Frankfurt School, the heart of late post-industrial economies is the industrialization of culture. Culture becomes the main source of income in an age in which it is no longer a problem to supply mankind’s material needs.

Where physical conditions and material shortage no longer force people to work just to survive, the Frankfurt School saw a system of production that subordinates an entire population to the rules of its own mechanism, motivated by endless technological advance.

All the while, using only a fraction of mankind’s production capacity and working time in post-industrial economies, all the real needs of the population could be supplied.

material conditions alone cannot bring about the revolution. This breaks Marx’s belief in a definite path to history. For Horkheimer, the only way beyond a post-industrial economy is for people to realize the totalitarian elements embedded in consumer culture – and this can be achieved only through education.

For Adorno, mass media forms the backbone of post-industrial economies, responsible for intoxicating” the population and preventing them from improving their social situation. Not religion, but the media has become the “opium for the masses”.

The Situationists

a group of radical leftist thinkers and artists active between 1957 and 1972.

For Debord, even rebellion becomes a commodity, as demonstrated by the products aimed at and sold to angsty teenagers.

As every choice becomes a pseudo-choice and mankind becomes increasingly alienated from reality, the result is that the world becomes banal. The more banal things become, the more the spectacle affirms their importance and vitality, the more it affirms that things are anything other than banal.

In 1988, Debord published Comments on the Society of the Spectacle, in which he says that the spectacle has become so powerful that resistance to it is no longer possible. He committed suicide in 1994.

Among conservative critics the same idea has a long tradition, for reasons including the belief that capitalism is taking us away from the spiritual life and has led to the breakdown of traditional values. This was the cause of the Luddite social movement, which during 1811–12 led attacks against the industrialized textile mills in Britain of the early Industrial Revolution.

Capitalist thinking is just as nihilistic as technological thinking, because in capitalism nothing has an intrinsic value beyond its exchange value on the market. All essential distinctions between different occupations and lifestyles disappear, as they all merge into the capitalist market and lifestyle.

In agricultural societies, a person’s environment, culture, profession and social status were all integrated. For each person, the world and their place in it were imbued with sense and value, and social life was a complete whole that was nevertheless localized and historical.

Scientific and technological management of society is the very root of the problem, according to the conservative critique. What is needed is a deep philosophical understanding of the purpose of mankind and concepts like justice, nobility and the good life.

what conservative thinkers are calling for is an ideological revolution, not a material one. They do not wish to change the way goods are distributed, but rather to displace management, technology and progress as the principal values of modern society. This should be achieved mainly through education and intellectual influence on elite groups holding key positions in society – such as intellectuals, religious institutions and the government.

John Rawls (1921–2002) revived academic interest in political philosophy and the question of the social justice of capitalism in English-speaking countries with his book A Theory of Justice (1971).

the idea of a social ...

The original position uses the idea that if you are ignorant of your own self-interest, the only thing you can do is act fairly, because it is only by acting fairly that you minimize the risks to yourself – ignorance models impartiality.

Rawls’ answer is that from the original position we’d choose a society that minimized personal risk, as self-interest would steer us away from situations that might result in us ending up as slaves.

The difference principle says that social inequalities are justified only if they help the worst-off in society more than any other way of distributing goods.

The liberty principle represents Rawls’ loyalty to liberalism and a generally capitalist framework. The difference principle represents his revision of classical liberalism and his attempt to integrate it anew with social justice.

Although Rawls’ views are about as left as liberal thinking gets, they should not be confused with socialism. The main difference is that Rawls does not take equality and the reduction of social gaps as an end in itself. It does not matter, for Rawls, if there is gross inequality in the population, as long as the worst-off benefit from this.

Criticisms of Rawls’ theory include pointing out that the original position might not be as Rawls presents it – it might not be as neutral as he maintains, and might stack the deck towards modern, individualistic social structures. Perhaps Rawls’ best-known critic is his Harvard colleague Robert Nozick (1938–2002). In his book Anarchy, State and Utopia (1974), he argues in favour of right-wing libertarianism.

Francis Fukuyama (b. 1952) also uses the idea that history – viewed as the process of human development – will stop. But instead of stopping with communism, Fukuyama believes that it ends with capitalism and liberal democracy. He famously put this view forward in a book called The End of History and the Last Man (1992).

the apparent victory of democracy and capitalism at the end of the 1980s and the beginning of the 1990s could well just be an accident of events. To claim that they are the end of history, Fukuyama needs to provide a mechanism that explains why history is leading up to them. Fukuyama approaches this from two angles: the first is an argument from natural science designed to show that human history is directional.

1. Natural science is one area where people can definitely be said to make progress – Newton was a brilliant physicist, but it is quite correct to say that today’s undergraduate understands more about the world than Newton did. 2. Natural science shapes societies by giving military and economic advantages: military and economic success mean that countries must match the technology and often production techniques of their neighbours. 3. In effect this is industrialization, as it involves more than just bringing technology into the workplace – it involves rationalizing the division of labour, and the transportation of goods, i.e. the essence of efficient capitalism. However, this argument is not enough to get Fukuyama to the claim that capitalism is the end of history. For that he needs a second argument, and this requires two more ideas: