How Capitalism Will End
The need to organize the economic life of humanity better than capitalism does is well established. Capitalism — by which I mean the buying and selling of labor power — breeds inequality, as Karl Marx showed and as Thomas Piketty has just re-demonstrated. Capitalism subordinates collective needs, such as our present need to address climate change, to private, short-term and particularistic interests. Capitalism generates large-scale unemployment, especially as technology erodes the need for labor, as is the case today. For any one who has a rational, organizational mentality capitalism is actually a bit of an embarrassment.
At the same time, capitalism has marked a vast step forward over traditional modes of economic life, such as those associated with agriculture, whether small-scale or large. In part the reason for this is that it has been associated with other advances, such as democracy and science, but those connections are not necessary ones. Another reason, however, which is core to economic life, is that capitalism has a rational core; it is ultimately based on a mathematical approach to nature. I do realize that the problem of capitalism, and more broadly of science and math, raise a host of political and moral questions, which I will not address here. But I do want to consider the place of mathematics in our economic life, in its relation to capitalism.
Economic life, certainly once we have a division of labor, is infinitely complex. The market, however, gives it a quantitative character: everything is given a value, expressed in such forms as prices, wages, profits, costs and interest. The buying and selling of labor-power, in turn, makes a global labor market possible. Quantification in short enables the vast improvements in social organization we have seen in the last century or so, such as the factory system, the national market and now the global market. It also reflects the association of capitalism with a post-traditional, rational way of life.
Communism was no match for capitalism in innumerable respects, most of all because of the Bolshevik failure to respect liberal rights. But in addition communists were not able to organize economic life in an efficient manner, at least over the long run. The reason was that in substituting planning for the market, they lost the automatic, mathematical reasoning that the market provides. Ludwig Von Mises pointed this out in 1920. Responding directly to the Bolshevik Revolution, he argued that Communists would not be able to come up with a rational means of pricing goods, and he was right. After World War Two when the Communists controlled a third of the world they still took their prices from the capitalist world market. And prices are necessary if we are to produce and allocate goods and services.
The extraordinary complexity of the modern economy, then, in which there are almost an infinite number of variables, has given private property and the market their air of inevitability. However, what if advances in mathematics, such as chaos theory, fractals, complexity theory, modeling, and the like make truly rational planning possible? In that case, capitalism would lose much of its rationale. To grasp this possibility, consider the advances made in another area in recent years, one that is frequently compared to the economy, because it is so complex, and subject to so many variable, the study of the weather.
Fifty years ago it was impossible to predict the weather, just as it is impossible to predict stock prices or real estate values today. Yet we have revolutionized our knowledge of the weather, including the capacity to predict. Two changes were fundamental to this revolution: weather balloons, beginning in 1959, which changed the study of the weather from a two-dimensional to a three-dimensional frame and the use of satellites, which began around the same time, and which have made a detailed mapping of the world’s topography and atmosphere possible. To be sure, we still cannot predict the weather with absolute certainty, any more than we will ever be able to predict exactly how much steel needs to be produced, or where exactly it needs to be shipped. But all knowledge that is not a priori is probabilistic, and that will certainly suffice.
Marx long ago predicted that capitalism will produce its own gravediggers, but his prediction was based on a romantic, even millenarian, conception of democracy and of the capacities of the modern working class. Still, his prediction may yet be borne out, through the growth not only of mathematics and science, but of a rational worldview. To be sure, such advances will not produce socialism, and also run the danger of technocracy. The changes we need will occur through politics, and through ethical change, and I am not addressing these here. But at least, with the development of modern mathematics, the weight of rationality falls toward socialism and away from markets. Some features of capitalism, including focused, restrained markets and certain areas of competition, will always be useful, but the present day organization of global economic life around private property and markets already has the appearance of a jerrybuilt, ramshackle contraption, constantly in need of bail-outs, like an old ship. Globalization, along with today’s scientific and mathematical advances, make a more rational approach not only necessary but possible, in a way that was never the case before.