Abstract
For the first time in human history, capitalism in its various forms has established itself worldwide as the superior form to organize economic activities. The central question for social science research is to find an explanation for why, of all possible forms of economic activity, this particular one dominates the world economy today. Following Max Weber and Joseph Schumpeter, the chapter sees the answer to this question, in the unique capacity of this economic system to provide large masses of the population with goods of daily use, better than any other system, on a constantly rising scale. In spite of the overwhelming success of this completely new form of economic activity, its emergence and worldwide implementation has been accompanied by an ongoing criticism that emphasized more disadvantages than advantages connected with it. This criticism, notwithstanding, the capitalist economy has established itself worldwide, not the least because of the lack of a convincing alternative to it. This insight, however, does not contain an eternal guarantee for the existing system. It could be, firstly, that the capitalist system no longer performs exactly the service on which its superiority and attractiveness are based: the reliable and continuous increase in the output of goods. Secondly, it could be that the negative side effects slowly but surely, outweigh the successes at some point. Finally, the case may arise that the demand for this particular achievement decreases with increasing wealth.
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Notes
- 1.
Cf. System of National Accounts 2008, 63: “Fundamental to the distinction between corporations and government is the basis on which production is undertaken. Corporations produce for the market and aim to sell their products at economically significant prices. Prices are said to be economically significant if they have a significant effect on the amount that producers are willing to supply and the amounts purchasers wish to buy.”
- 2.
- 3.
Cf. Sombart (1916, 6): The least that must be in existence to be able to speak of capitalism is a capitalist enterprise.
- 4.
In the transition from a traditional to a capitalist mode of production, hunger and misery were increasing among the working population. However, in the long run, wage labor is the safest way to access food and raise the standard of living of the wage dependent population. See also Drèze and Sen (1989).
- 5.
“It is leadership rather than ownership that matters. The failure to see this... is the common fault of both the economic and the sociological analysis of the classics and of Karl Marx” (Schumpeter 1939, 103 f.).
- 6.
Schumpeter thus understands capitalism as money economy, just as Marx and Max Weber did before him but unlike neoclassical economics. Money is not a veil that lays itself over real conditions, but an essential element of economic activity in capitalism.
- 7.
Wallerstein (1979), defines capitalism as a system for making profit, regardless of the type of labor, (e.g., plantation economy, slave labor, wage labor) on which it is based.
- 8.
The textbook by Furubotn and Richter (1998) provides a good overview of this field of research.
- 9.
It is not necessary for the entire range of products to be provided by firms organized in this way. Self-employment in retail, crafts and professions (doctors and lawyers), as well as public enterprises, also contribute to the supply of goods and services.
- 10.
Weber continues stating that capitalism can almost be identical with taming, at least with rational tempering, of this irrational drive (Weber 1920, 4). Under conditions of full competition, the most that can be achieved with the pursuit of profit is avoiding losses after settlement of all contractual payment obligations.
- 11.
The extent to which this promise is fulfilled, in countries that organize their economies on a capitalist basis, is not under discussion here. But it would be premature to conclude from the fact of environmental pollution that the economy is its central cause. For the market-based solution to the pollution problem, see Sect. 4.2.
- 12.
Frey offsets the long-term economic successes of technological innovations since the Industrial Revolution against the suffering and privations to which the groups of people directly affected were exposed, above all, through the loss of jobs. “The ‘Great Escape’... didn’t immediately turn the cottage of the commoner into a Garden of Eden” (2019, 8).
- 13.
- 14.
The pursuit of private benefits leads to a better supply of consumer goods to each and every person. This is perhaps the most powerful idea of Smith’s Wealth of Nations (Smith 1950).
- 15.
See Hemmer and Lorenz (2004) for a textbook presentation of the methods and results of this branch of research.
- 16.
Between the poles of capitalism and socialism there are many mixed forms, including the social market economy. A more recent and detailed presentation of alternatives to capitalism is Corneo (2017). Corneo, unlike this contribution, defines capitalism as a system of private property and market exchange, thus making no distinction between a market economy and capitalism. For the reasoning put forward here, however, this distinction is essential.
- 17.
Cf. Corneo (2017, Chap. 6).
- 18.
This does not need to apply to all workers. Whether wage labor implies exploitation depends on the level of wage payment. Under the validity of the Marxian Fundamental Theorem (exploitation is the sole source of profit) company profits would then only be possible if the millions paid to the top management result from their exploitation of the low-income earners.
- 19.
It might be said that exploitation is the genuine achievement of the entrepreneur. “The misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all,” Joan Robinson (1962, 45) noted.
- 20.
Cf. only the employee participation rights, typical of capitalism in the Federal Republic of Germany.
- 21.
By contrast, the central planning of production aimed at providing the population with consumer goods is labeled consumer socialism.
- 22.
Information on the long-term development of the industrialized countries is available and very well highlighted by Max Roser (www.ourworldindata.org).
- 23.
This follows from the definition of the Gini coefficient: G = Δ/2μ, with Δ = the mean difference of income and a value for μ, the average net income in Germany, of 1800 euros. See Berger (2019a, Appendix A3).
- 24.
The Gini coefficient, like all measures of inequality, ignores the question of whether differences in income are justified or unjustified.
- 25.
Figures for the USA: Real per capita economic growth in the USA was 2.35% between 1970 and 1980, 2.23% between 1980 and 2000 and only 0.8% between 2000 and 2010. The deceleration called for in the post-growth camp has also taken place in the USA. However, the growth rates (in constant dollars of 2010 after the Great Recession of 2009 between 2010 and 2018 in constant dollars of 2010 once again reached 2.2% on average).
- 26.
Brynjolfsson and McAffee (2014) firmly contradict this diagnosis.
- 27.
A capitalist system works smoothly if “the workers spend what they get, and capitalists get what they spend.” (An aphorism attributed to Michael Kalecki by Joan Robinson.).
- 28.
Easterlin (1981, 16) is much more skeptical about these prospects: “While it would be pleasant to envisage a world free from the pressure of material want... a more realistic projection for the developed countries is of a world caught on a ‘hedonic treadmill’.”
- 29.
It is, for example, worthwhile checking whether the popular claim can be maintained that egoism and competitive thinking are spreading, whereas solidarity and cooperative behavior are on the retreat. Which kind of data would back this claim? Would these tendencies, if confirmed, indicate a definite boundary of the dominant economic system? Finally, do such developments, provided they exist, really have their roots in the economic system or rather in the much broader process of the rationalism of Western culture?
- 30.
For an overview of the corresponding approaches, see Federal Statistical Office, Germany (2014).
- 31.
Environmental economic calculations depend on many preliminary decisions on which, if I am right, there is no consensus at all. The main problem is to find a common denominator for calculating the positive and negative effects of a growing economy on human welfare. Gross domestic product is not in itself a welfare indicator, but only a component of a more comprehensive index of human welfare.
- 32.
William Nordhaus relies more on a Pigou-tax. “According to Nordhaus’ research, the most efficient remedy for the problems caused by greenhouse gas emissions would be a global scheme of carbon taxes that are uniformly imposed on all countries” (The Royal Swedish Academy of Sciences: The Prize in Economic Sciences 2018).
- 33.
Tirole (2017, Chap. 9) argues for a single carbon price to meet the climate challenge. “The first priority of future negotiations ought to be an agreement to establish a universal carbon price compatible with the objective of no more than a 1.5 to 2 degree Celsius increase in average global temperatures” (Tirole 2017, 229). For reasons of space, I cannot elaborate on other developments that allegedly threaten the sustainability of capitalist systems, such as the threat of job loss caused by a new wave of automation or the threat to the stability of capitalist economies originating from the increasing importance of an inherently unstable financial sector. For the former problem see Frey (2019), for the latter, Minsky (1982).
- 34.
Similarly, Meade states (1976, 16 f.): “citizens could freely choose between high prosperity with low participation in the large-scale enterprises and low prosperity with high participation in the small-scale co-operatives”.
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Berger, J. (2021). Capitalism: On the Past and Future of an Economic System. In: Maurer, A. (eds) Handbook of Economic Sociology for the 21st Century. Handbooks of Sociology and Social Research. Springer, Cham. https://doi.org/10.1007/978-3-030-61619-9_18
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