Does Capitalism Have a Future?

NEW YORK – As 2008 came to a close, many Europeans began to speak about the end of capitalism. They forget that capitalism in Europe had already once given way – often violently – to statism and corporatism in the 1930’s, to be revived in only a handful of countries in the 1980’s.

In view of the current financial crisis – the latest in a series that capitalism has seen – it is fair to ask whether the benefits of capitalism, if any, still exceed the costs. Although Marx confessed considerable admiration for capitalism, it is now suggested that the good in it – entrepreneurship – can be genetically engineered in another sort of system without the destructiveness to which capitalism is predisposed.

Capitalism was first admired for being “progressive,” as Marx put it. When productivity rose, it did not fall back again. In fact, with the emergence, piece by piece, of finance capitalism, circa 1820, productivity took off in one European country after another – Great Britain, Belgium, France, Germany, and Austria. Productivity sped up even more – began rising even earlier – in the United States. The paltry historical data available for analysis suggest that, around 1820 or so, wages (adjusted down for bouts of inflation in prior decades and up for deflation in subsequent decades) took off in a similar fashion.

Nowadays, there is a respectable body of opinion that questions whether growth in productivity beyond the towering levels seen today is of any great value compared to the fearsome costs that are taken as given in most discussion. But, in my thinking and empirical research, this fashionable hypothesis cannot stand.