William Kingston, How Capitalism Destroyed Itself: Technology displaced by financial innovation, Edward Elgar, 2017, ix + 174 pp, 1 78536 773 1, hbk, £65
Capitalism is so much a part of the world that we live in, and even of who we are, that we might find it difficult to recognise that there is nothing inevitable about it. We have created its institutions, and they can decay as easily as they can thrive. So-called ‘free markets’ are never free, and are always prone to manipulation by the powerful; and private property can cease to be a useful social institution, and instead become an instrument of domination. Capitalism might be dying, and this book is about what’s gone wrong:
Those who deal in money got control of the laws relating to it, which made Western economies less capable of generating real wealth, because it became so much more profitable to invest in financial innovation than in technology. (p. vii)
The author does not appear to have read Guy Standing’s The Corruption of Capitalism (Biteback Publishing, 2016), perhaps because he finished writing his book before Standing’s was published. Their messages, both in general and in detail, are very similar. They both recognise the importance of intellectual property rights, designed to encourage innovation, but now monopolised by the wealthy in order to increase their wealth; and both are critical of a financial industry that has captured the institutions that ought to be controlling it.
Kingston’s first chapter describes capitalism’s development, its characteristics, its modern history (structured in relation to Kondratieff waves), and its success at fostering innovation.
The second chapter charts the early history of capitalism and its institutions from the ancient Greeks, through early Christian writers, to the Reformation and the Enlightenment. (The monasteries of the Middle Ages were particularly important locations for the application of scientific knowledge to practical application.)
Chapter 3 recounts the capture of democracy by financial interests, and then turns to a detailed history of intellectual property rights, of US corporations’ effective control of global property rights legislation, of the loss of any sense that intellectual property rights are meant to serve the public good, and of financial interests employing property rights legislation to stifle innovation rather than encourage it.
In chapter 4, Kingston dubs as ‘alchemy’ the ways in which banks create credit, and therefore money, and he recounts the ways in which governments have enabled banks to create even more money by giving them limited liability, providing central banks as lenders of last resort, guaranteeing customers’ deposits, and allowing banks and auditors to become largely unregulated. Kingston also recounts how wealthy corporations have taken control of trade agreements, thus corrupting so-called ‘free trade’.
In his final chapter, Kingston asks what could have been done to save capitalism. He suggests transparency in relation to the owners of companies; that banks should lose their limited liability; that trade mark registrations should be time-limited; that property rights in information should be eliminated; that governments should fund research; that poorer countries should be allowed access to patented information. He argues that a Citizen’s Basic Income should be implemented because of its ability to incentivise employment and self-employment, and because, if it was structured as a National Dividend, it would be in everyone’s interests to encourage innovation in order to create the wealth that would then be equally shared.
Much of this book is based on Schumpeter’s prediction of capitalism’s difficulties, which initially looked as if they had been proved wrong, but now appear prescient. One of Schumpeter’s worries was that democracy would mean that states would not be able to resist their populations’ demands for public services and transfers, which would require debt financing, and would therefore require governments to prevent banks from failing. As Kingston points out (p. 33), the provision of public services enables corporations to make money out of government contracts rather than out of technological innovation, and the provision of transfers invites lobbying by interest groups. One of his arguments for Citizen’s Basic Income is that it would reduce the lobbying of elected politicians.
In his epilogue, Kingston describes quantitative easing as capitalism’s life support machine. This pretty well sums up his view of the situation.
One minor criticism: the book could have been better structured. Chapter 2, on the early history, ought to have come first; and the first part of chapter 3, on the corruption of democracy, would have been better later in the book.
As Kingston points out, it is when the privileged have ceased to take seriously their responsibilities that empires have risked revolution, and that this might be the situation that we are now in. This is a bleak book, and an important one. We might not agree with everything in it, but the overall argument is persuasive. It is high time that our governments got themselves out of their election cycle mentality, asked about the long-term good of our economies and our societies, and took some action.