Will Capitalism End? (The Post-Capitalist World)

What would a post capitalist world look like? More importantly, will capitalism end? Some of the greatest economists the world has seen foresee an eventual end to the capitalist period of history. Great economists across the board, that is. Some socialist, and others staunchly pro-capitalist. As to how right they are, is frankly speaking, beyond my pay scale.

While it would be incredibly arrogant of me to even speculate, it would be within my limits to point out what a few of them generally had to say about the eventual end of capitalism. Here are five points of view in brief of six great economists with wide ranging socio-economic viewpoints:

[Note: Capitalism as a system is characterized with the innate tendency of accumulation of wealth beyond which any other system has or will accomplish. This has been recognized by economists and social thinkers across the board].

1) Adam Smith: Adam Smith described the process of accumulation of wealth that characterizes capitalism will ultimately reach a plateau when the attainment of riches will be “complete”, followed by a large and lengthy decline. Smith did not concentrate on the specifics of the decline and what would come after.

2) David Ricardo and John Stuart Mill: Ricardo and Mill anticipate the arrival of a “stationary state” which Mill foresees as the staging ground for a certain kind of “associationist socialism” after capitalism reaches a peak of wealth accumulation. Mill came increasingly to re-examine the objections to socialism, and came to argue in later editions of the Principles that, as far as economic theory was concerned, there is nothing in principle in economic theory that precludes an economic order based on socialist policies. He therefore made the radical proposal that the whole wage system be abolished, and that it be replaced by a cooperative system in which the producers would act in combinations, collectively owning the capital necessary for carrying on their operations, and working under managers who would be responsible overall to them. Like Ricardo, he held that profits in the long run would tend to diminish and that the formation of new capital would thereby come to an end. This would bring industry to a halt and population to a stationary level. The result would be a relatively static form of society.

3) Karl Marx: Marx anticipated a series of worsening crises, each crisis serving a temporary rejuvenating function, but bringing closer the day when the system will no longer be able to manage its internal contradictions. His theory of dialectics would come into play at this point. Social change would eventually occur. He argued that capitalism, like previous socioeconomic systems, would produce internal tensions that will lead to its destruction. Just as capitalism replaced feudalism, capitalism itself will be displaced by communism, a classless society which emerges after a transitional period—socialism—in which the state would be nothing else but the revolutionary dictatorship of the proletariat.

4) John Maynard Keynes: Keynes anticipated a “somewhat comprehensive socialization of investment” would replace the current methods of investment. Investment today, as it was in the days of Keynes is lumpy and is affected by expectations and the bullishness of a few investors, which may or may not be based on rational ground. Keynes predicted that investment in the future would factor social cost and benefit.

5) Joseph Schumpeter: Schumpeter on the other hand anticipated that the capitalist system would evolve into a kind of bureaucratic socialism. Schumpeter concludes that this will not come about in the way Marx predicted. To describe it he borrowed the phrase “creative destruction,” and made it famous by using it to describe a process in which the old ways of doing things are endogenously destroyed and replaced by new ways. Schumpeter’s theory is that the success of capitalism will lead to a form of corporatism and a fostering of values hostile to capitalism. The intellectual and social climate needed to allow entrepreneurship to thrive will not exist in advanced capitalism; it will be replaced by socialism in some form. There will not be a revolution, but merely a trend in parliaments to elect social democratic parties of one stripe or another. He argued that capitalism’s collapse from within will come about as democratic majorities vote for the creation of a welfare state and place restrictions upon entrepreneurship that will burden and destroy the capitalist structure. Schumpeter emphasized that he was only analyzing trends, not engaging in political advocacy.

******

Joseph Schumpeter believed that capitalism in the most competent system for allocating resources. He believed that monopolies and oligopolies are the norm (and should continue to be) and not perfectly-competitive markets. Adam Smith is well known to believe in the invisible hand of the capitalist economy. David Ricardo was a proponent of free trade. Mill was a classical liberal economist who later turned to socialism. Clearly, these political-economists all believed in the magic of capitalism, and yet predicted its demise. I contend that I haven’t (yet) reached a position where I can refute these beliefs – if at all that has any merit.

On the other hand, contemporary mainstream economists regard capitalism as a system whose formal properties can be “modeled” along general equilibrium or other dynamic lines, without the need to bother about the political destinations towards which they head. But then again, these economists look at situations only in static theory.

As to who finally turns out to be true can only be answered correctly in hindsight, and I doubt anyone of us would live to see the day of the demise of capitalism, if at all that day comes.