In
1889 Houghton Mifflin published Looking
Backward: 2000-1887, a novel by Edward Bellamy that looked at the Gilded
Age from the perspective of more than a century hence, when enlightened
socialism had replaced brute capitalism, and the world had become a kinder,
gentler, more egalitarian place.
Almost
no one reads the book now, but at the time it was a sensation. The publishers
couldn’t print copies fast enough. Apparently, during the time so beloved by
Glenn Beck, a lot of people were thirsting for a more decent and humane alternative.
By 1900 Looking Backward was the
second best-selling novel in American history, trailing only Uncle Tom’s Cabin.
It’s
hard to imagine now, but back then a lot of smart people assumed capitalism
wouldn’t last another century. The inequality and injustice it spawned, they
reasoned, were unsustainable, and either through revolution or the democratic
process, some sort of socialism would take its place.
What
got me thinking about this was a throw-away line in a recent New
Yorker essay by Nicholas Lemann, reviewing several books on economic
inequality. “It’s clear in retrospect,” Lemann wrote, “that the existence of
the Soviet empire was a spur to social democracy, in the United States and in
Europe, because it was a serious competitor whose main selling point was
generous social provision. The West had no choice but to compete.”
Bellamy,
Karl Marx and other communal utopian thinkers of the time guessed wrong about
the future of capitalism at the same time they shrewdly critiqued its
shortcomings and contradictions. Their mistake, in a general sense, was that
they couldn’t imagine it tacking with the political winds and changing in any
substantive way.
But
as Lemann pointed out, capitalism — like the shopkeeper whose competitor is
selling at a lower price — had to adjust or go out of business. The great
majority of business leaders never got the point, were in fact singularly
clueless. But they were bailed out by the democratic process and politicians,
particularly Franklin D. Roosevelt. In a just world, there would be a statue of
FDR in front of the New York Stock Exchange, with an inscription on the
pedestal reading, “If not for him, we wouldn’t be here now.”
Socialism
and communism are in bad repute at the moment, and as a consequence, capitalism
is exhibiting the classic behavior of a monopolist. We all know what happens
when a local store has no competition: It can easily become arrogant and unresponsive
to its customers and employees. The customers of an economic system are the
members of society at large, and like the customers of a business, they, too,
benefit when there’s competition.
In
a democratic society voters disgruntled with an economic system can, like
customers of a non-performing business, take their custom elsewhere. Capitalism
hasn’t yet honked off its customer base to that extent, but it’s certainly
heading in that direction. If it isn’t diverted from the path it’s on, the
consequences for all of us could be ugly.
Every
economic system has its flaws, but a free market, coupled with a robust social
safety net has been the least flawed alternative to date. Growing inequality,
coupled with a rending of the safety net, inexorably drives society toward one
of two unpalatable alternatives: A dictatorship to forcibly maintain gross
inequality or a revolution to replace it with something else, which could turn
out to be nearly as bad in a different way. Capitalism dodged a bullet once by
smoothing out some of its sharper edges. It needs to do it again, but where’s the
competition to provide the motivation?
