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Capitalism: No morality outbreak any time soon

Adam Smith did not envisage a world dominated by huge, impersonal corporations but understood the economic and social dangers they posed


ADELAIDE - Like Phil Fitzpatrick (‘Is moral capitalism even possible?’), I have been thinking about whether capitalism can ever be conducted in a moral and ethical way.

And like him, I can remember another time and place where the absence of great corporations meant capitalism worked along the lines foreseen by Adam Smith when he wrote ‘Wealth of Nations’.

Smith had envisaged a world of small businesses which were predominantly operated by one person, or maybe a family. He did not envisage a world dominated by huge, impersonal corporations.

Indeed, he made reference to the economic and social dangers posed by monopolies and oligopolies.

In doing so, he was both prescient and recalling the power of the medieval guilds that controlled trade for so long in both the English and Scottish economies.

Unhappily, Adam Smith’s worst fears have been realised.

His ‘invisible hand’ does not work to promote the greatest good for the greatest number. Rather, it now works to promote the interests of the very few over the many.

Advocates for the current neo-liberal system like to boast that it has raised huge numbers of people out of poverty, thanks to the ‘trickle down’ effect.

While it is certainly true that huge numbers of people, notably in China, have been raised out of abject poverty, this has been an incidental effect of their mass exploitation to achieve the rapid industrialisation required for states like China to make the leap from essentially medieval socio-economic circumstances into modernity.

In doing so, these states have emulated the achievements of Britain’s industrial revolution during the period 1750- 1910 and the United States, which underwent a similar transition from roughly the end of the civil war in 1865 to about now.

Japan achieved something similar, first in the Meiji period from 1886-1912 and then again from 1946-1990.

In every case the improvement in the lives of the people has not come from the generation of wealth by itself.

Rather, it has been the result of the political and business leaders realising that, to maintain social stability and cohesion (and so retain their privileged positions), it is essential that the people they exploit receive sufficient rewards, both private and social, to accept that the system overall is worth supporting.

In the case of China, President Xi Jinping has been explicit about this part of the bargain between the Communist Party he leads and the broad mass of the people.

It is one of the reasons he is cracking down so hard and ruthlessly on corruption, which is endemic within China’s power elite.

I do not think that morality enters into this calculation to any great extent. It is a question of realpolitik, practical politics, not morality.

I predict that when, as it must, China’s great period of economic expansion finally sputters to a halt or, at the very least, falls back to within historically normal levels, social restiveness within China will begin to emerge because of what many Chinese already understand to be an unfair division of wealth and resources.

In the case of Papua New Guinea, it is unclear to me whether the ordinary people understand the extent to which they have been exploited, whether directly or through simple neglect, by the few who control the country’s wealth and resources.

It seems to me that people like Gary Juffa, Brian Kramer and others like them in the Marape government do understand the problem. What they can do about it is an open question for now.

But one thing is for sure, there is not going to be an outbreak of morality and ethics anytime soon.

The lesson of history is that those with their snouts in the trough will have to be forcibly removed.


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