Capitalist Realism

People have been worried about a thing called capitalist realism. Capitalist realism is the idea that there is no alternative: that capitalism is the only game in town. However, capitalist realism cannot be seriously maintained. A brief analysis of the past, and a cursory look at the present, reveals this. Capitalist realism is prevalent today simply because the current economic paradigm - ‘neoliberalism’ - needs it to be. But technology marches on, and looks set to leave neoliberalism in the dust. Capitalist realism is finished; but what about capitalism itself?

‘Neoliberalism’ is capitalism in its ‘pure’, unrestrained form. It has been popular since the 1980s, and whilst its failings are widely pointed out today, it is still in practice in much of the West. Neoliberalism is defined by privatisation (selling off government assets), deregulation (getting rid of tax and wage laws) and austerity (cutting social welfare). It uses capitalist realism to explain away its own instability: it says that despite appearances, this pure form of capitalism is the most rational of all possible options.

The economy is an attempt to rationalise (‘bring into ratio’ or balance) human trade. We say that a person is thinking rationally when their various competing drives are appropriately balanced. When we are trying to get a grip on our own minds, it is the bringing into harmony of various competing impulses which enables us to operate in a stable and generative fashion. We can say that the economy is rational in the same way: when the human drives which contribute to trading behaviour are brought into some sort of arrangement whereby utility is maximised and negative impact kept to a minimum.

Throughout the 20th century, capitalism and communism competed to rationalise the economy. Both doctrines attempted to circumscribe one aspect of human economic behaviour and generalise it into a normative rule for the whole world. This is the same pattern we see with religion: you pick one aspect of human nature, say ‘this is what a man is’, and then try to make the world fit that image. In a similar fashion, communism and capitalism took opposite aspects of the human exchange tendency and tried to bring them into reality: capitalism picked the ‘humans are naturally competitive’ side, whilst communism opted for ‘humans are naturally cooperative’ instead.

If either of these ideas was demonstrated, in the 20th century, to be more in accordance with economic reality than the other, that award must be handed to capitalism. But it would be a colossal act of faith to move from capitalist success to capitalist realism. It would require accepting that capitalism operates most effectively in its ‘pure’ form, without restraint.

However, this is exactly what happened. The crushing of labour resistance in the 1980s, followed by the onslaught of new technologies brought about by the information revolution, distracted us enough to accept capitalist realism as true. But are we stuck with it?

I am going to argue that capitalist realism is beginning to collapse because capitalism, in the wake of the information revolution, is beginning to decouple from productivity. However, because of the way capitalist realism warps history, we have to get a handle on the past if we are to escape its gravity. We need to see how capitalism came about, and how it changes, in order to properly appreciate its nature as a complex and adaptive system. Once we have done this, we can see that its continuation is by no means guaranteed, and begin to think of a way out.

Communism vs Capitalism

Capitalism has not been around forever. Trading has been around for a really long time, but capitalism as an organising economic principle - one that sets the unrestricted pursuit of profit as the driving force of trade - has only been around for a few hundred years. It was an evolution from feudalism. Under feudalism, obligation was the name of the game. Capitalism changed that name to ‘money’. Now, rather than hashing out some deal with my lord, whereby I kill this guy and he gives me that castle, we can separate the transactions: he can pay me to kill the guy, then I can use the money to buy a castle from anybody I like. It increases the flexibility and openness of economic systems, allowing for an expansion and intensification of trade.

Capitalism really took off with the industrial revolution, as new technologies created a global network, high finance, and mass-produced goods. However, people wondered whether and to what extent the state should get involved. Governments could ‘pull levers’ on the economy to control it, injecting cash or adjusting inflation, or they go the whole hog and set up a ‘top down’ command economy, whereby specially appointed government councils would sit down and decide, for example, how many tractors would be needed in this district that quarter.

This was unwieldy, however, and poor planning frequently led to famine, low productivity, and excess tractors. When the markets were left to ‘do their thing’, by contrast, new fields of productivity opened up, as swathes of labourers and consumers found themselves wired in to the globalist regime. This ‘wiring in’ counted as a victory for the capitalists. Communism’s failed application, by contrast, demonstrated that it didn’t map at all well onto the human psyche. But why not?

It was the belief that capitalism was necessarily and imminently bound for death that caused the Marxists to make a fatal misstep in their conception of human nature, and consequently in their economic project. They believed that the workers of the world, once told of the oppressive forces of capital and its impending collapse, would spontaneously convert to marxist ideology. But Marxist ideology was based on the idea that people would all work together for equal reward. It failed to properly appreciate the competitiveness of humanity that motivates our economic behaviour, which is neatly and completely accommodated by the capitalist realist economic principle.

This competitiveness was the economic reality which undermined the socialist project. Individual workers pursuing their own short term interests undermined the ‘technocratic management and centralised planning’ of socialism. The spontaneous ideology of the working class wasn’t Soviet communism, but rather ‘control, social solidarity, self-education and the creation of a parallel world.’ Capitalism, with its pretensions to freedom, its accommodation of individuality and self-expression, was better able to support this.

The error in theory led to a failure in practice. The fact that communism devolved so easily into barbarity seemed to suggest that it was idealistic, because it was unable to capture anything enduringly true about human economic behaviour. Any system built on the idea that people would spontaneously collaborate, it appeared, would sooner or later end up with some of them getting lined up against a wall and shot.

Freud, in Civilisation and its Discontents, had argued that humans had a fixed nature which culture represses into functionality. Wherever our animal side was pushed down, he thought, it would push back up in some other unexpected place. As a result, we had these primal death drives which culture couldn’t help but express. Culture must always have a shadow side, and capitalism seemed to accommodate that: we do our best to be good people, but when it comes down to it - to the hard reality of making a living - we are animals at heart, and must get the job done. So the failure of communism handed an easy victory to capitalist realism. If capitalism was able to accommodate the death drive in a reasonably functional manner, then we should have to accept that human nature, such as it is, really might achieve its most virtuous expression through the capitalist system. However, capitalism is failing to ‘sublimate’ (effectively contain) the death drive. Neoliberalism demonstrates that pure capitalism creates bipolarity, in economy and psyche.

Neoliberalism

First, a caveat. Neoliberalism has had quantifiably positive real-world consequences. Economists Ostry, Loungani and Furceri argue that ‘there is much to cheer in the neoliberal agenda. The expansion of global trade has rescued millions from abject poverty. Foreign direct investment has often been a way to transfer technology and know-how to developing economies. Privatization of state-owned enterprises has in many instances led to more efficient provision of services and lowered the fiscal burden on governments.’

But feudalism got some beautiful castles built, got some pretty functional motte-and-bailey farming collectives going and enabled countries to operate as wholes for the purposes of international politics. But we wouldn’t point to the achievements of feudalism and say it was the best system, precisely because a) we can point to the flaws in that system (the instability, the plotting, the necessary incest) and b) because we can argue that an alternative system does it better. We don’t do feudalism any more because capitalism ‘did it better’, relative to the changed environment. It seems like capitalism, in its pure neoliberal expression, is no longer a productive fit for the world. The downsides of neoliberalism are systematic. It increases inequality, creates global instability, and goes through ‘bipolar’ booms and busts. Whilst these may have been justified on grounds of productivity in a world defined by material scarcity, the information revolution calls into question its relevance today.

Neoliberalism frees up as much capital as possible by keeping interest rates as low as possible. This discourages savers and encourages investors, creating ‘capital account openness’; keeping the money flowing. The problem with this is that the money tends to flow towards the top and away from the bottom. savers at the bottom get their savings wiped out whenever the government pull the levers and inject more money into the system, through things like quantitative easing, whilst investors are insulated from the risks of their gambits: investors are protected from absorbing the full cost of failed ventures.

’Since both openness and austerity are associated with increasing income inequality’, notes Paul Mason, ‘this distributional effect sets up an adverse feedback loop’. This results in a bipolar economy. Booms and busts have been pervasive under neoliberalism: there have been about 150 instances in more than 50 developing countries since 1980, around 20% of which have ended in financial crisis. This leads Dani Rodrik to say that these are ‘hardly a sideshow’ in neoliberalism: they are ‘the main event’.

The instability of neoliberalism should give us a clue that it is no longer fit for purpose. Neoliberalism fails as a rational economic doctrine precisely because of its commitment to capitalist realism. It is because neoliberalism is based on the idea that market forces are self-regulating (that no other ‘natural’ force is required to keep them in check) that it renders the system too fragile, too vulnerable to shocks.

The logic of this is simple: in the past, we’ve had other ‘levers’ to pull when something goes wrong with the market. That’s allowed it to work without too much upset. Now that ‘there are no levers’, the market cannot adapt or survive whenever it is hit with a big shock; it has to get bailed out, and then carry on as if it never happened.

So something - the bailout - really is happening, but this is incompatible with the capitalist realist story that holds neoliberalism together. Clearly, the ‘precarity’ of neoliberalism demonstrates that capital forces, whilst real, are not the only real forces in town. Capitalism is forced to deny the existence of an increasingly productive ‘exhaust’.

The capitalist project seems to depend on two things: generating productivity, and plausibly being able to deny the negative ‘exhaust’ effects of this productivity. The information revolution calls into question both of these abilities. But why?

Kondratieff’s Wave

Nikolai Kondratieff was a soviet economist who was shot for denying that capitalism’s death was imminent. He modelled the 240-year history of industrial capitalism with an account of how it would generate, and then respond to, shocks.

According to the wave, industrial capitalism proceeds in 50-year cycles, made up of a 25-year upswing and a 25-year downswing. A new up-swing begins as capital begins to accrue in the finance sector (banking and trading) and investors begin to look for new markets to enter. They invest their money, and new technologies are born. New jobs are created, people are trained to do them, and the economy prospers. Then, the new technology begins to become standardised, made cheaper and easier to use, and, in later stages, sold to the masses. When those technologies start becoming cheaper and easier to use, it stops being viable to pay trained operatives to use them, so capital begins to attempt to deskill the workforce. At this point, the downswing begins.

The actual history of industrial capitalism has, more or less, supported this model. Kondratieff’s data begins in 1790. Since then, we have gone through four (almost) complete cycles, and started a fifth.The first industrial revolution, with its textile factories (1790-1848) was followed by the birth of the railroads (1848-1890s), which was in turn followed by the second industrial revolution (heavy industry) (1890-1945), transistors and mass consumerism (1940s-2009), and finally the internet age (1990-now).

In each of these phases, worker resistance had dealt with the downswing by rationalising the economy away from pure capitalism. The textile mills of the first industrial revolution provide a key example. When the factories were first set up, skilled male operators were required to use the spinning machine, whilst women and children performed the manual, ‘non-skilled’ (though often hazardous) task of sorting through the threads. Over time, however, these machines got more advanced, until the day came when the first automatic spinning machine entered the factory. The bosses asked the male workers to relinquish their positions, and train the women and children under them to use it. They refused. Following several years of strikes, the workers were eventually given rights and the vote. Whilst people dispute the claim that this resulted in meaningful change, it did at least keep capital in check by proving that labour could not be exploited indefinitely. It proved that unrestricted market forces could not survive against the real power of human labour.

However, something strange happened at the end of the fourth wave. Worker resistance, rather than successfully rationalising the economy away from neoliberalism, was crushed. In England, this took the form of the repression of the miner’s strikes and the attack on the trade unions.

Most of us accepted this new state of affairs. A newly globalised world presented no shortage of cheap labour, able to perform the newly de-skilled jobs at a rate that would undercut domestic workers. Neoliberal countries sought to offshore work and encourage immigration, driving down the cost of labour and the power of that labour to resist it. In the mean time, a new suite of technologies had come along, distracted us, and fundamentally changed our relation to productivity in the process.

However, the information revolution has changed things in other, unexpected ways. Capitalism has typically been productive because of scarcity: the lack of ‘stuff’ made capitalism a good system for making sure that stuff was in the right place at the right time. And stuff created value: if you could get the worker, or the machine, into the factory and producing a consumable good, your company would profit. Information changes all this. It is abundant, and it is immaterial. This undermines the scarcity which makes capitalism productive. But does it undermine it totally? And might capitalist realism survive the transition anyway?

Post-capital gains

As with all new things, there is enormous scope for elation and despair. The despair side is easy: as I’ve talked about before, ‘achievement society’ puts us in the ‘auto-confessional’, wherein we experience our giving up of data as a rational and free choice. It might be that we’ve been ‘hacked’ (or that we really are just having our needs catered for, and that i’m just being difficult) and that’s all there is to it: we’re in the same position as always, just more aware of it. Just as the establishment turned our class anger back against ourselves through the mainstream media, so too may it commandeer the new mechanisms of information to turn twitter outrage into inert and endless factionalism.

In the future which affirms capitalist realism, we find ourselves locked in to what Shoshanna Zuboff calls ‘surveillance capitalism’. People continue to go to work. Deregulation continues to drive down wages, which the government supports through a social welfare system that effectively operates as a subsidy on low-paying employers. You continue to consume, and your data - every little bit of it - is slowly hoovered up by the capital engine, turned into value for someone else, somewhere. But you don’t know that. You are content, well-serviced; busy.

Not terrible, of course, as long as capitalism manages to successfully cover over and justify its ‘exhaust’ effects. But we should at least consider the alternative.

The French psychologist Jean Piaget formalised the notion that life is a game. When we cooperate, we set up a game, the rules of which all players accept. Religion is a game; so is the economy. Games end when people don’t want to play them; when they stop being generative. When people stop wanting to play, the people who do want to play try to control the information: they try to get you to change the way you see the game, to see the rules as good and fair, and if they cannot get you to see it like that, they might tell you that there are no other games to be played, or punish you for not playing this one. This isn’t to say that the world is frivolous - games can kill - but it does provide a useful framework for understanding why the capitalist realist project is in danger.

With the advent of the transistor, the internet, and Web 2.0, information has been untethered from its material basis to an unprecedented extent. Each communicative technological revolution makes it easier to transmit information further and faster. The printing press, by making books widely available to everyone, saved the effort of a lot of monks copying out passages, and those monks in turn saved the effort of walking from village to village telling people your thoughts. But the printing press required paper; the telegram, cable. With the information revolution, the capacity of these media exploded, minimising the material cost of storage. Within 40 years, a pocket calculator’s computational power outstripped the machines that put Neil Armstrong on the moon. The cables got fatter, the chips got smaller, and information, for the first time in human history, became definitively cheap.

To the extent that information determines the value of something, the capitalist project is completely undermined by the abundance of information. But information doesn’t completely determine the value of anything, because of how it interacts with material. The relationship between information and material, then, should give us some clues as to the future of capitalism. All products have a material and an informational component. Food has the material component (the thing that it is) and the informational component (the history of its production, incorporating such facts as who was paid what, how it was transported, and how much of the product remains in the ground). The informational component affects the price: people will not pay as much for food which they know has not been produced sustainably, or which they know is more abundant than the high price suggests, if they are given the choice.

In order to retain control, capital controls information and choice. It drives down the cost of foodstuffs, covers over the negative side-effects of their production, then keeps our wages low to ensure that we only buy the cheap stuff. Even though we know its bad, the lack of money paralyses our outrage into ‘reflexive impotence’: we convince ourselves that its OK to buy the cheap eggs because hey, free-range doesn’t even really mean free-range, right? The only way to escape the negative side-effects of capital are to have enough money to buy the expensive eggs, which means generating more ‘exhaust’ somewhere in the chain, out of our sight. There is a very real danger, then, that we will all be forced to continue with pure capitalism, simply because ‘it’ is too good at pushing its negative effects in to the future, out of sight, or onto someone else’s doorstep. However, even if this were the case, there is at least one sort of phenomenon capitalism has a hard time getting rid of. We saw throughout the 20th century that it had no problem getting rid of socialist governments: there was always a dictator with enough money ready to appeal to the US for a coup. Capitalism is able to dismantle rival economic systems when their existence is significantly based in the material. But the internet creates landscapes the invasion of which poses more of a challenge. Wikipedia represents an ideological challenge to capitalism on two fronts: it resists marketisation, and increases productivity.

Open-Source

Wikipedia is a free to use, not-for-profit website that relies on donations and voluntary contribution. What’s significant is just how well it’s worked. It has resisted capital’s onslaught, shaking off the brand of unreliability with which it was once tarnished and blowing a $3.6 billion hole in the advertising industry. Back of the net! Informational abundance has, for now at least, destroyed a market. And it has destroyed it precisely by destroying its control on information. There’s an argument that people need to be paid in order to make good intellectual property. But this is not the case; people just need to be meaningfully rewarded. Anthropologists note that money plays the role of gift. The creator of intellectual property derives social capital from his creation: if I write a good book, and lots of people read it, I’ll get invited to conferences and consultations, and get paid for them. I don’t need to get paid for the book as well: the social capital is its own reward. In the past, the capitalist middle-man (the literary agent, the publisher) earned his keep by sourcing the paper, firing up the printers, getting the Bright New Talent into the room with the Powerful Exec. But information changes all this: I can write a book, stick it on the internet, and with the right mix of advertising and quality, it can (in theory) reach everyone in the world. So what is the capitalist doing, besides extracting value for himself, and getting in the way?

The case of Windows provides a neat example of how capital now gets in the way of productivity. Intellectual property actually suffers from being privatised. We often think of Bill Gates as one of the most successful and philanthropic men in the world. But he isn’t. When he invented ALTAIR Basic (later Windows), he charged $200 for it. This has made him incredibly rich, and able to donate a fraction of that wealth to charitable causes. But it hasn’t made Windows the best operating system in the world. That crown goes to Linux. Linux was free, and produced spontaneously and collaboratively by a load of computer engineers who just wanted to make something good. The hard proof of this is that Linux is used on almost all of the top quantum supercomputers in the world, whilst Microsoft is not. Linux, unlike Microsoft, is Open Source: anyone can contribute to it. It’s really simple: open-sourcing information means that more people can contribute to it and learn from it. The net benefits are obvious.

Creating artificial scarcity in a world defined by informational abundance, especially where that information is the main driver of productivity and value, seems to impede progress but increase value (in capital terms). Our desire to reward the creators of intellectual property now comes in to tension with our belief that capital is a productive form of reward. Does this suggest that it’s time for capitalism to go?

We abandoned feudalism when obligation and productivity came apart. As intrigues abounded and kings lost their heads, we saw that obligation was not a sufficiently high-fidelity mechanism for ensuring successful collaborative production. We replaced it with money because, as Thouxanbanfauni raps, ‘numbers never lying’. But now numbers are lying: confected money is used to prop up a system that keeps falling apart without the help of a mechanism which it denies existing, that concentrates money unproductively into the hands of uncreative individuals.

Labour and productivity also seem to come apart. An increasing number of the jobs we do, David Graeber points out, are ‘bullshit’ - unsatisfying and unproductive. The Oxford Martin institute predicts that 47% of jobs will be automated in the next 30 years. These two facts together suggest that labour is no longer valuable. This calls into question a key principle of capitalism’s productivity logic. The ‘productivity logic’ that has supported this trend for the last few decades depends on the belief that a few smart and wealthy individuals can be more productive, when given the excess labour of many others, than the network of those labourers would be if they didn’t have to go to their ‘bullshit job’. That’s not a bad argument; you need a lot of money to create SpaceX. But we have to ask whether the creation of SpaceX is really the best way to pursue productivity in a world where production is no longer guaranteed by scarce material, but is instead guaranteed by abundant information. Hence, we have to ask whether concentrating material resources is really more effective than proliferating cognitive resources. Now that information is more relevant to productivity than material, it seems unlikely. There’s been a recent theory in sociology - ‘Diversity Trumps Ability’ - which maintains that cognitive diversity in a group, rather than the presence of any particularly cognitively gifted individual in that group, is the most significant determinant of that group’s problem-solving ability. Basically, getting lots of people who think differently to one another generates better solutions more quickly than an homogenous group of experts. So to the extent that cognitive progress is aligned with productivity, capitalism is at odds with it.

The Matter at Hand

If pure information is freed from capitalist principles, we still have to consider how this will impact on the material. Some products are more significantly material than others - food, housing and clothes seem to depend more on the material component for their utility than the informational component. Information might satisfy your ears, in the form of an .mp3, but it won’t keep you dry, or metabolise.

Since we will always need material, it is possible that we will always need capitalism. However, the private ownership of property and food manufacturing facilities is only made possible by a network of collaborative assent. The private owners have got very good, as we have seen, at securing this assent: they can turn our anger back in on ourselves, they can say that they have earned the right to private ownership, and they can say that we need people like them doing the things they do in order for society to function. But the more relevant information becomes to productivity, the less convincing this seems. The idea that I should have to go to work to line the pockets of my landlord seems absurd, when all the landlord is doing is extracting my value for his own private ends. It seems that the whole productivity logic has fallen apart: the idea that the people benefiting disproportionately from the set-up (the king and his aristocrats, say) do so because they contribute to the functioning of the system, the thing which is creating productivity, now seems laughable. The question now is whether we are going to organise around a new aristocracy of ‘tech-bros’, or whether those types of systems are now too fragile, thanks to information, to effectively cover over their own ‘exhaust’ and thus ensure their stability. Some neoreactionaries argue that monarchical systems are more naturally stable than democratic ones, seemingly forgetting the sheer numbers of intrigues, murders and coups which dominated the pre-democratic era and led to its eventual end.

‘Pure’ systems, be they monarchy or neoliberalism, function by circumscribing one aspect of human nature and forcing everyone else to recognise that image as true. The proliferation of information makes this project more difficult. People may be brow-beaten (‘shocked’ in Naomi Klein’s terminology) into capitalist realism for now, but they are not stupid; the genie is out of the bottle.

Capitalist realism’s last chance of survival depends on the efforts of the present elite. We have to expect that like the kings of old, the ruling capitalists will not go down without a fight. As long as money is valuable, they have immense power to control information and crush dissent. They can also weaponise our own worst side against us, serving us convenience, confounding our attempts to create counter-philosophies, and leading us to believe that it is easier just to submit. These are real obstacles which must be considered, but we are in a better position than ever before to deal with them: a position in which the abundance of cheap cyber-infrastructure allows us to collaborate in the creation of real economic forces that run contrary to capital.

For the new abundant future to be realised, we have to free up information. And in the mean time, of course, we need to find some ways to survive. Universal Basic Income would be expensive - doubling the UK’s annual benefits bill, according to Mason’s estimate - but it would begin to pay for itself. The social causes of physical and mental illness are well-documented, and these illnesses manifest in significant costs for the state in terms of intervention and care. A strategy which prioritised prevention instead, then - that kept people above the poverty line and insulated from the stress of living paycheck-to-paycheck - would begin to pay for itself quickly. If those people could then get working on a useful project as well, then doubly so.

Finally, we should pay no mind to the capitalist’s argument that a world without capitalism is a world without competition. The alternative is obviously not a communist utopia. Capitalism is attractive to people because we are spontaneously self-interested, and that’s no bad thing: that spirit of entrepreneurship is, absolutely, a driver of human progress. However, cooperation is more central to this story than capitalist realism can accommodate. It is competition within a network of assent, rather than unbridled competition ‘red in tooth and claw’, that ultimately generates such lasting improvements as the stock market, Amazon and Elon Musk. If we hadn’t specified what we were trying to do or set rules for how people should organise themselves, someone would’ve gone to Tesla and taken Elon’s head off by now. We do not, clearly, live in a world of pure competition, as the capitalist realist principle might have us believe, but rather in a world where competition is limited by a collaborative network of assent. Hierarchies emerge as they always emerge, in proportion to the group or individual’s relevance to productivity, and they decay as they have always decayed, as the criterion which established them is pushed into irrelevance by the changes we have made to the world. Now is not the time, then, to eliminate competition, but rather find a better principle than Capitalism for expressing it.

Conclusion

Today, pure capitalism survives as an irrational system. ‘Capitalism tends to destroy its two most valuable assets’, wrote Marx, ‘labour and nature’. It engenders depression to facilitate destruction. It pretends that it can continue to consume nature infinitely, despite its observable finitude, and when challenged, it denies that it has a problem. In so doing, it demonstrates its fundamental inability to bring the drives of life and death into balance. This is cognitive dissonance. Its logical conclusion is suicide. This is not to say that the future will necessarily be one without capitalism. But it will probably be one without pure capitalism. Pure capitalism was rational, perhaps, in an environment defined by scarcity, but informational abundance drove a wedge between productivity and capital, undermining it. We may find ourselves press-ganged into capitalist realism going forward; but we will not find ourselves convinced.

Additional content by Tom Chalkley