Can Capitalism Be Saved From Itself?

A review of Capitalism for Realists: Virtues and Vices of the Modern Economy by Tibor Rutar

Capitalism for Realists: Virtues and Vices of the Modern Economy

Tibor Rutar

Routledge, 188 pages, 2022

“Can capitalism survive? No. I do not think it can. But this opinion of mine, like that of every other economist who has pronounced upon the subject, is in itself completely uninteresting. What counts in any attempt at social prognosis is not the Yes or No that sums up the facts and arguments which lead up to it but those facts and arguments themselves. They contain all that is scientific in the final result. Everything else is not science but prophecy.” — Joseph Schumpeter, Capitalism, Socialism, and Democracy

It is very doubtful that anyone who reads Tibor Rutar’s short new book Capitalism for Realists will come away agreeing with it, but readers who are even somewhat charitable should find it profitable to wrestle with its thesis and remarkable breadth.

To Marx or Not to Marx

Rutar is that rarest of species: a former Marxist turned social democrat who retains a healthy degree of respect for (non-vulgar) Marxism even as he’s “discovered the joys of freedom, equality, property, and Bentham.”

Capitalism for Realists tries to chart a narrow path between adopting a Marx-inflected critical stance on the modern global economy, while chastising the hard left for not appreciating all the good capitalism has done for the least well off. This includes pointing out that Marx and Engels themselves were not exclusively critical of the capitalist mode of production, consistently describing it as the highest mode of production the world has yet seen. Even highly polemical early works like The Communist Manifesto stress how the

bourgeoisie has disclosed how it came to pass that the brutal display of vigour in the Middle Ages, which reactionaries so much admire, found its fitting complement in the most slothful indolence. It has been the first to show what man’s activity can bring about. It has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals; it has conducted expeditions that put in the shade all former Exoduses of nations and crusades.

Rutar’s beef is that, despite acknowledging capitalism’s extraordinary productive capacity, many leftist still insist it remains so problematic that it must be destroyed or at least massively reformed.

Rutar runs through what he takes to be the major charges one at a time, acknowledging that some of them have genuine bite while criticizing others for lacking substance.

Simultaneously critiquing and defending contemporary capitalism on all the charges raised against it is a large task, and it is to Rutar’s credit that he undertakes it with courage and analytical integrity. Overall, his assessment is that the record of contemporary capitalism is mixed:

Capitalism reduces exploitation experienced by workers but also at the same time keeps a degree of exploitation in place and is unable to remove it completely. Capitalism most definitely helps reduce poverty, but at the same time it can also contribute to increases in inequality. It unleashes a massive dynamic of job-creation, but also pulls the employment rug for underneath some workers. The modern economy overall strongly promotes human pro-sociality, but in certain aspects does nothing for it or even reduces it somewhat. Capitalism contributes to environmental degradation, especially through industrial production but it also presents us at least with the possibility of having a highly economically developed society that harms the environment less and less the more it develops. All this is, to put it in Marx’s words, an epochal ‘fact, palpable, overwhelming, and not to be controverted.’

Each of the core chapters of the book tackles one of these topics, and throughout it all Rutar marshals a formidable empirical case to support his overarching lukewarm assessment.

Without a doubt some of the chapters are stronger than others, which is partially a consequence of the book being a slim 188 pages while covering a massive scope of highly complex socioeconomic subjects.

For instance, I found the initial chapter on the historical origins of capitalism very brief and somewhat strangely fixated on the United Kingdom. Interestingly, this may be the chapter where Rutar most demonstrates a lingering fidelity to Marxist sociology, describing himself as a “moderate materialist” who thinks the ideational cultural production critiqued by Marx as ideology does indeed largely emerge from changing material conditions and social relations.

Rutar also stresses that there is little denying the violent and highly disruptive origins of capitalism—indeed, even going further than Marxists by arguing it wasn’t the “heavy artillery” of cheap prices which spread markets, but the actual heavy artillery of the imperialist European powers. Yet Rutar never helps us determine what the normative weight should be for these historical observations, or what their impact is on contemporary contexts. This might have shifted his approach to “neoliberalism”—whose vices Rutar downplays—given that many contemporary critics of neoliberalism stress its deep continuity with the very history of imperialism he critiques earlier in the book.

Inequality and Justice

Rutar’s most effective chapter is on poverty, exploitation, and inequality—precisely the chapter that fideistic and unthinking leftists will appreciate the least. In it, Rutar capably critiques the most blithe opponents of capitalism, pointing out that there is little evidence it contributes to absolute immiseration and immense data that markets can lift people out of poverty. This is true even where growth is distributed unequally.

At the same time, Rutar argues that capitalism does indeed exploit workers, since their wage is not equal to the “marginal product” created by the worker. Rutar points out that even though growth is typically aligned with decreases in overall poverty, that doesn’t mean inequality isn’t a problem along that and many other metrics. Rutar isn’t sure that critics like Thomas Piketty are correct in saying that inequality is increasing everywhere, but he does stress that inequality can cause political instability, increased possibility for the rich to engage in rent-seeking and corruption, and rising educational inaccessibility.

I would put the point with considerably greater force than Rutar. Domestically, inequality is problematic for moral reasons of fairness and just concern for the least well off in society. One would have to be naïve to think declining economic productivity would benefit the poor—which was never a point Marx made. As any good Rawlsian can tell you, the incentive structures conducive to growth must be shown to primarily benefit the least well off.

This is not just a matter of distributive justice—it also has a political bearing. Rutar acknowledges that stark inequalities can engender political conflict, and gestures to a few examples. But it would have been helpful to see him look at more comprehensive studies on how inequities of economic power contribute to deepening inequities of political power, or what Rawls would call citizens receiving unequal value from their political rights. For instance, Gilens, Eatwell and Goodwin, and more recent work by Piketty have all demonstrated how citizens in developed states both perceived democratic institutions as being beholden to the interests of the wealthy and that in fact those institutions are primarily beholden to the interests of the wealthy.

More expansively still, Rutar’s book would benefit from discussing how the vast disparities in economic power engendered by markets globally render many states—particularly former colonies—extremely vulnerable to domination and exploitation by the more affluent. This has included the imposition of market friendly social policies even against the wishes of the domestic population, or what Quinn Slobodian called “encasing” the market from democracy through the state and international legal instruments. This is one of the core objections to the “Washington Consensus” Rutar lightly defends on consequentialist grounds, while largely sidelining the problem of geopolitical domination and neocolonialism.

My criticisms should not be taken as a condemnation of the author or his project. Capitalism for Realists is a very thoughtful, well written, and richly analytical book which should provoke a healthy dialogue from across the political spectrum. Rutar’s own conclusion is that markets and capitalism are good if they are paired with a powerful social democratic state which ensures their benefits are available to everyone and works to offset the negative externalities like environmental degradation.

I would go further and argue that the time has come to experiment with the extension of democratic principles to the economy through creating incentives to form competitive worker managed firms accompanied by a very robust welfare state. This idea has a long an eminent pedigree that includes formulations by political scientists like Robert Dahl, and is increasingly subject to popular attention. We should also think seriously about what kind of international institutions will be required to check the global power of particularly sweeping firms, in addition to coordinating efforts to check climate change.

Being a realist about capitalism means being realistic about its all-too-human inadequacies. The experience of totalitarian command economics undoubtedly shows not just anything is fit to replace capitalism. But if there is a social architecture that is fit, then market oriented liberal socialism would be it.