Triumph of capitalism

TIMOTHY GARTON ASH is professor of European studies at Oxford University and a senior fellow at the Hoover Institution at Stanford University.

WHAT is the elephant in all our rooms? The global triumph of capitalism. Democracy is fiercely disputed. Freedom is under threat, even in old democracies like Britain. Western supremacy is on the skids. But everyone does capitalism.

Americans and Europeans do it. Indians do it. Russian oligarchs and Saudi princes do it. Even Chinese communists do it. And now the members of Israel’s oldest kibbutz, that last best hope of egalitarian socialism, have voted for salaries based on individual performance. Karl Marx is turning in his grave. Or perhaps not, because some of his writings eerily foreshadowed our era of globalized capitalism. His prescription failed, but his description was prescient.

What, after all, are the big ideological alternatives? Hugo Chavez’s “21st century socialism” still looks like, at most, a regional phenomenon best practiced in oil-rich states. Islamism -- billed as democratic capitalism’s great competitor in a new ideological struggle -- offers no alternative economic system (aside from the peculiarities of Islamic finance) and does not appeal beyond the Muslim umma. Most anti-globalists are better at pointing out the failings of global capitalism than they are at suggesting systemic alternatives. “Capitalism should be replaced by something nicer,” read a placard at a May Day demonstration in London a few years back.

Of course, there’s a question of definition here. Is what Russian or Chinese state-owned companies do really capitalism? Isn’t private ownership the essence of capitalism?


One expert on capitalism, Edmund Phelps of Columbia University, has an even more restrictive definition. Capitalism, he says, is “an economic system in which private capital is relatively free to innovate and invest without permissions from the state and green lights from communities and regions, from workers and other so-called social partners.” In which case, most of the world is not capitalist.

I find this much too restrictive. Surely what we have across Europe are multiple varieties of capitalism, from more liberal market economies like Britain and Ireland to more coordinated “stakeholder” economies like Germany.

In Russia and China, there’s a spectrum from state ownership to private ownership. Considerations other than maximizing profit play a part in the decision-making of state-controlled companies, but they too operate in national and international markets and increasingly speak the language of global capitalism. China’s “Leninist capitalism” is a big borderline case, but the crab-like movement of its companies toward more rather than less capitalist behavior is clearer than any movement of its state toward democracy.

Does the lack of any clear ideological alternative mean that capitalism’s triumph is secure? Far from it. For a start, the history of capitalism hardly supports the view that it is an automatically self-correcting system. As George Soros (who should know) points out, global markets are now more than ever constantly out of equilibrium -- and teetering on the edge of a larger disequilibrium. Again and again, capitalism has needed the visible hands of political, fiscal and legal correction to complement the invisible hand of the market.

And the bigger it gets, the harder it can fall. An oil tanker is more stable than a dinghy, but if the tanker’s internal bulkheads are breached and the oil starts swilling from side to side in a storm, you have the makings of a major disaster. Increasingly, the world’s capital is like oil in the holds of one giant tanker, with ever fewer internal bulkheads to stop it from swilling around.

Then there is inequality. One feature of globalized capitalism seems to be that it rewards its high performers disproportionately. What will be the political effects of having a small group of super-rich people in China, Russia and India or other countries where the majority are super-poor? In more developed economies, such as Britain and the U.S., a reasonably well-off middle class, with a slowly improving personal standard of living, may be less bothered by the super-rich. But if a lot of middle-class people begin to feel that they are personally losing out as a few fund managers get stinking rich and jobs are outsourced to India, you may have a backlash. Watch Lou Dobbs on CNN for a taste of the rhetoric to come.

Above all, though, there is the inescapable dilemma that this planet cannot sustain 6.5 billion people living like today’s middle-class in its rich north. In just a few decades, we would use up fossil fuels that took about 400 million years to accrete -- and change Earth’s climate as a result. Sustainability may be a gray and boring word, but achieving it is the biggest single challenge to global capitalism today. However ingenious modern capitalists are in finding alternative technologies -- and they will be very ingenious -- somewhere down the line richer consumers will have to settle for less rather than ever more.

Marx thought capitalism would have a problem finding consumers for the goods that improving techniques of production enabled it to churn out. Instead, it has become expert in a new branch of manufacturing: the manufacture of desires. It’s that core logic of ever-expanding desires that is unsustainable on a global scale. But are we prepared to abandon it?


We may be happy to insulate our lofts, recycle our newspapers and bicycle to work, but are we ready to settle for less so others can have more? Am I? Are you?