Capitalism’s Nine Lives

Predicting the end of the free market system is a mug’s game, but a bigger welfare state is a pretty sure bet.

Is capitalism doomed? For well over 150 years, theoreticians have argued that it is, yet so far their prophecies have not panned out. Karl Marx famously predicted that the Industrial Revolution would set up a great political clash between business owners and the working class, ending “either in a revolutionary reconstitution of society at large, or in the common ruin of the contending classes.” Many socialists thought the Great Depression represented the final death throes of the capitalist system. Even some conservatives and liberals at the time thought the system would implode or disappear within a century. Yet it has seemingly survived intact up to the present day. That failure of prediction is the subject of Foretelling the End of Capitalism, by Francesco Boldizzoni, a professor of political science at the Norwegian University of Science and Technology. 

Though Boldizzoni is perfectly clear about the gruesome side effects of unfettered capitalism, it simply isn’t possible to predict sweeping revolutionary events with any accuracy. Those who do so inevitably fall prey to intellectual blind spots or biased thinking. However, he doesn’t fully consider how parts of capitalism—at least as he defines it—have already disappeared in Western nations. 

Foretelling the End of Capitalism by Francesco Boldizzoni, Harvard University Press, 336 pp.

Boldizzoni has a deep familiarity with the thinking of both the anti-capitalist left and the pro-capitalist right, and his discussion of the intellectual evolution of various factions within both camps is superb. He runs through different strands of socialist predictions, starting with Marx’s argument that the rate of profit would eventually decline, sparking a revolutionary crisis. When that didn’t work out, Marx made the much more prescient prediction that increasing productive capacity would not keep pace with wages, leading to a crisis of overproduction and underconsumption.

It wasn’t just socialists who got in on the action. The conservative economist Joseph Schumpeter disdained Marx’s analysis but darkly suggested that intellectuals might help labor activists undermine the capitalist order. Marx was wrong about the manner in which capitalist societies would break down, Schumpeter said in a speech, but “he was not wrong in the prediction that it would break down eventually.”

The liberal John Maynard Keynes wrote in 1930 that within a century there would be so much economic production that citizens of wealthy countries would be able to live lives of unprecedented leisure, and greedy money hoarding would be viewed as a disgusting moral abomination—effectively ending capitalism. “We shall honour those who can teach us how to pluck the hour and the day virtuously and well, the delightful people who are capable of taking direct enjoyment in things, the lilies of the field who toil not, neither do they spin,” he wrote.

Keynes’s predictions about economic production were remarkably close to the mark, but neither his, nor Marx’s, nor Schumpeter’s political predictions have come to pass. Even as the Great Recession of 2008 shattered the reputation of unfettered capitalism, and now with the global economy in free fall due to the coronavirus pandemic, there is no immediate prospect of any left-wing revolution. There isn’t even much evidence that the revolutionary left is poised to win power through democratic elections in most countries. On the contrary, the extreme right has so far been much stronger, winning power in the United States, Brazil, India, Hungary, Poland, and elsewhere—and such factions pose no threat to capitalism.

Boldizzoni argues that these sweeping predictions were fatally undermined by “cognitive distortions” inherent in any attempt to predict the future. The very project is extremely difficult; a theory of history may capture a lot of important truth, but not the entire thing, and be undermined by factors it does not have room for. At bottom, history is a messy business, heavily dependent on random circumstance (like viral pandemics). 

More importantly, people trying to discern the future are often biased by their own moral viewpoint, and end up predicting what they would like to see; gazing into a crystal ball, “one actually ends up seeing the image of oneself reflected on its surface,” Boldizzoni writes. The biggest and most important bias for both liberal and socialist forecasters has been a utopian faith in progress. Marx, the godfather of capitalist doomsday predictors, was firmly in the Enlightenment tradition that held that rationality and science would allow humanity to cast off the baggage of history and superstition. 

But it is simply not the case that history necessarily moves toward a better future over the long term. Boldizzoni is therefore careful not to make a prediction of his own that capitalism is invulnerable or will last forever. “Like all the products of history, one day capitalism will end, or rather slowly turn into a new system,” he writes. But trying to call exactly when this will happen, or how, is a mug’s game.

All that said, Boldizzoni’s discussion of the defining features of capitalism suffers from vagueness and omissions. Many wealthy countries today have eroded or abolished key features of capitalism, according to his own definition. Yet he doesn’t consider how this affects his argument about failed predictions.

He borrows a definition from the American economist Robert Heilbroner: 

Capitalism is an economic order marked by the private ownership of the means of production vested in a minority class called “capitalists,” and by a market system that determines the incomes and distributes the outputs arising from its productive activity. 

We can approximate the means of production (factories, tools, land, raw materials, shares in corporations, etc.) by the national wealth. In a capitalist country, most people must be excluded from substantial ownership of this wealth, and “those who are deprived of ownership must have the freedom to enter into contractual agreements to sell their labor power,” Boldizzoni writes.

That is an accurate description of capitalism in the 19th century, when taxes were low and almost no one had income aside from what they got from labor or returns on wealth. But it is not nearly a complete description of many economies today. Consider the welfare state: All rich countries now have substantial social programs that distribute income to people who do not work—retirement pensions, unemployment or disability benefits, a child allowance, and so on. According to the Organisation for Economic Co-operation and Development, these programs range between 11 percent of GDP in South Korea and 31 percent in France. Across the whole OECD, an average of about a fifth of economic production is allocated this way. Contrary to Boldizzoni’s assertion that in recent decades welfare programs “were being dismantled,” they have proved extremely sticky in almost every wealthy country. Indeed, OECD data once again shows that since 1990 most rich countries have increased the share of GDP dedicated to social spending—even the United States (though it did cut welfare payments to poor unwed mothers in 1996). 

Furthermore, in many countries labor income is not distributed through the free market. When a worker is a member of a union, wages are set through negotiation between union representatives and bosses, not by a labor market. In the U.S., only 12 percent of workers are covered by a union contract—piddling by European standards. In Austria the figure is 98 percent; in Belgium it is 96 percent; in Iceland it is 92 percent; and in Sweden it is 90 percent. In countries with sectoral bargaining, like France, Austria, and Portugal, wages are set across entire categories of business simultaneously. It is not surprising that in such countries labor income is much more equal than it is here. (Like the U.S., these countries are growing more unequal, but at a slower rate.)

Finally, in a few countries a significant share of the national wealth is publicly owned—that is to say, a good chunk of the means of production is not owned by a private minority. Take Finland and Norway, which both have cutting-edge welfare states, mass unionization, high state employment, and strict employment protections. In Finland, the state owns assets valued at 129 percent of its GDP, and its directly state-owned companies are valued at 52 percent of GDP. That pales in comparison to Norway, where the equivalent figures are 331 percent and 88 percent, respectively. Norway’s huge portfolio of state-owned companies includes its largest oil company, Equinor; its largest telecom company, Telenor; and its largest bank, DNB. This is as if the United States owned and operated ExxonMobil, AT&T, and JPMorgan Chase. Norway’s various levels of government own about a third of the country’s publicly traded stock market. All told, the Norwegian state owns 75 percent of its national wealth (if you exclude owner-occupied housing, which makes sense when talking about the means of production). 

So in Norway, at least, a minority does not own the means of production, and incomes are distributed with relatively little regard for market mechanisms. It is most peculiar that Boldizzoni, who lives and works in Norway, does not discuss in detail what is arguably the most non-capitalist country in the world by his own definition.  

Predicting the sweep of history is virtually impossible, and Boldizzoni is right that trying to jam all of human behavior into one grand social theory is bound to go wrong. But it also seems that at least a couple of countries genuinely have ditched most of the defining features of capitalism with no ill effects. (Norway was rated as the happiest country on earth in 2017 by the United Nations.) If others can learn from that lesson, then the end of capitalism may be much closer than anyone realizes.

Support the Washington Monthly and get a FREE subscription

Ryan Cooper

Ryan Cooper is a national correspondent at the Week. His work has appeared in the Washington Post, the New Republic, and the Nation. He was an editor at the Washington Monthly from 2012 to 2014.