There Is No Such Thing as Capitalism

by Germán Gullón

In 1991 the French philosopher Jean Baudrillard provocatively proposed that the Gulf War “did not take place.” Indeed, he elaborated on this thesis over three essays, initially predicting that the war would not take place. Subsequently—as the missiles flew across our screens—Baudrillard observed that the war wasn’t actually taking place. Finally, once it was over and in an astonishing coup de grâce, he proclaimed triumphantly that it hadn’t taken place at all. Arming himself with postmodern concepts such as ‘simulacra’ and the ‘hyperreal’, Baudrillard argued that this had in fact been no war at all, merely a “mediated non-event” fought remotely with a combination of US air power and carefully orchestrated television imagery. Perhaps ironically, the world largely shrugged at the curious ideas of this French “philosopher clown.” 

In the English-speaking world at least, philosophers are rarely given much airtime to demonstrate their relevance to the modern world. Perhaps the only exception in the UK is the new clown prince philosopher, communist relic Slavoj Žižek, who is occasionally granted five minutes at the end of Newsnight to explain his funny theories about how the film Kung Fu Panda demonstrates the triumph of capitalist ideology. The nearest Žižek has come to having any serious impact on our collective consciousness has been through his popularisation of the idea that it is “easier to imagine the end of the world than the end of capitalism.” 

Perhaps we don’t need these clown philosophers. Do they really tell us anything significant that we don’t already know? After all, while others have developed Žižek’s ideas (such as Mark Fisher who has taken up the idea of a systemic framework, prevailing ideology or pervasive atmosphere that precludes the possibility of alternatives with his work on Capitalist Realism), it was Margaret Thatcher back in the Eighties who first introduced us to TINA—There Is No Alternative. 

And yet…

Since the financial crisis, something has changed. In the last five years, the establishment and the guardians of our ideology have begun to seriously question our economic system. The church, the state and the crown are together on this one: The Archbishop of Canterbury describes the “unreal and insane world that our financial systems... encourage us to inhabit;” Andy Haldane at the Bank of England said, “It is time to rethink some of the basic building blocks of economics;” and Prince Charles said ,“A new approach has to be, I would have thought, a fundamental transformation of global capitalism.” 

Of course rarely, if ever, do these voices ever question the idea of capitalism itself. Instead, it is proposed, we should tweak capitalism towards a more ‘Progressive Capitalism’ or an ‘Inclusive Capitalism’, ‘Responsible Capitalism’, ‘Ethical Capitalism, ‘Connected Capitalism’ or ‘Breakthrough Capitalism’, to name but a few suggestions. So while there may be variations, the capitalist TINA still reigns. Beyond the Occupy movement and other minority ‘alternative’ schools of thought, it is still unacceptable to be anti-capitalist, at least in the corridors of power. 

So we have come to admit that something is wrong with the world but it can’t possibly be the idea of capitalism. How can this be reconciled? Perhaps our funny friends Baudrillard and Žižek do have something to offer us here after all? Baudrillard’s point was to emphasise the dislocation between what we tell ourselves and the underlying reality. Žižek’s point is that we have been captured by an ideology. Taken together, they might be urging us to look behind this ideology of capitalism and see what’s really going on. 

This echoes Karl Marx—the grandfather of trying to make philosophy relevant to the real world—whose approach was to look at both ideology and the material conditions of life. In his words, “The totality of these relations of production constitutes the economic structure of society, the real foundation, on which arises a legal and political superstructure and to which correspond definite forms of social consciousness.” There may indeed be no credible alternatives to the ideology of capitalism within polite society but—hold on a minute—what does the actual material economy look like? As Kevin Carson points out, there are two ways of talking about capitalism: free market principles and ‘actually existing capitalism’—which may be two very different things. 

What does the economy actually look like? Is it capitalist? 

A capitalist economy would be one in which the means of production and distribution and exchange are largely based on private or corporate ownership of capital. Let’s take the UK as an example and a GDP expenditure approach for consistency. A good place to start is the 2014 Budget that reports public spending accounted for around 43% of GDP in 2013/14. Over time, the public sector has made up between 42% and 47% since the financial crisis.

This implies that the private sector share of the economy sits between 53% and 58%. However, and critically, that which is not public is not necessarily private. Rather, it may be social, common, or co-operatively owned, managed and run. NCVO figures, for instance, suggest that the voluntary sector’s expenditure is equivalent to around £38 billion or 2 to 3% of UK GDP (although NCVO put the sector’s contribution or GVA at nearer 1.5%). 

Meanwhile, the co-operative sector expenditure accounts for around £34 billion or another 2 to 3% of GDP. In addition, a number of other social enterprises, such as community interest companies, may not be considered under either the voluntary sector or co-operative figures. Taken as a whole, this suggests that the share of the economy under private control has been somewhere between 46% and 54% since the financial crisis. So far, so inconclusive. Perhaps this is Schrodinger’s Capitalism?

But this ignores the shadow economy, that which is not monitored by the state and not included in GDP figures. The World Bank found that over the period 1999 to 2006/07, the weighted average size of the shadow economy as a percentage of official GDP was 13.5% in high-income OECD countries. In the UK the figure was more than 12% but falling, so we could conservatively assume 10%.

Yet the wider informal economy (going beyond that activity which deliberately seeks to bypass the state’s clutches, which was the World Bank’s focus) could be much higher. The gift economy or sharing economy—what Ivan Illich calls shadow work—would count for a greater proportion of GDP again. According to David Bollier, one study estimated that the value of unpaid work in Britain is equivalent to 77% of GDP but not included in official GDP figures. Women’s contribution is most often ignored and forgotten. Sharon Astyk suggests that “the informal economy is, in fact, the larger part of the world’s total economy. When you add in the domestic and household economy of the world’s households, the subsistence economy, the barter economy, the volunteer economy, the ‘under the table’ economy, the criminal economy and a few other smaller players, you get something that adds up to 3/4 of the world’s total economic activity. The formal economy—the territory of professional and paid work, of tax statements and GDP—is only 1/4 of the world’s total economic activity.” 

It is important to note that this activity may still include trading in markets and competition led by the invisible hand. But that doesn’t necessarily make it capitalism. Too frequently we forget the distinction between markets on one hand and capitalism on the other. The social sector trades in markets, and humans have traded since the dawn of man. But capitalism is a more recent phenomenon, driven by institutional models which tend to focus more ruthlessly on exchange value and remove space for the softer, more subjective, social value that can play a greater role in the social, co-operative, voluntary and informal economies. 

Finally, to complete the exercise, or perhaps disrupt it, it turns out that much of the economy is actually unreal. Or rather in Baudrillard’s terms, ‘hyperreal’. Frederick Jameson has pointed out how, in late capitalism, Marx’s ‘fictitious capital’ has become entirely disconnected from the underlying referent of reality. Much of the capitalist system is now simply make-believe. This isn’t just the view from obscure circles of Marxist academia—‘volatility guru’ Christopher Cole of Artemis Capital Management explains, “Modern financial markets are a game of impossible objects. In a world where global central banks manipulate the cost of risk the mechanics of price discovery have disengaged from reality… In the postmodern economy… [o]ur fiscal well-being is now prisoner to financial and monetary engineering of our own design. Central banking strategy does not hide this fact with the goal of creating the optional illusion of economic prosperity through artificially higher asset prices to stimulate the real economy. In doing so they are exposing us all to hyperreality or what Baudrillard called ‘the desert of real’.” 

So much, it seems, of what we tend to think of as capitalism has become an “economy of pure sign functions.” John Lancaster dates this development to 1973 and the publication of the Black and Scholes formula, which helped price and thus catalyse the market for derivatives—now worth trillions of dollars and many times the value of global GDP (making a mockery of the real). Recently, the Bank of England published an explanation of how money is created, admitting that “bank deposits make up the vast majority—97% of the amount currently in circulation. And in the modern economy, those bank deposits are mostly created by commercial banks themselves.” So when the unit by which we measure the value of the economy is a unit that can be conjured from thin air by anyone with a banking licence, it seems we have entered a bewildering landscape of economic postmodernism where value is surface only and where the connections between signifier and signified have been utterly severed. 

So where does this leave us? It seems in the UK at least and in many other parts of the world, capitalism is not the dominant mode of production. On one hand, taken in material terms, the underlying reality of the economy is not capitalist—bona fide, formal, institutional capitalism probably accounts for under 50% of GDP. Capitalism may be the single dominant mode of production but it doesn’t hold a majority. On the other hand, if we look more closely, the whole show turns out to be a fairy story. 

So it seems there is no such thing as capitalism

That capitalism does not actually exist can be liberating for those who worry about capitalism. On one hand, in theory, we can use this evidence to pierce through the ideology and step out of the matrix. This knowledge can be a weapon with which to fight against the dominance of conventional business news on the radio, assumptions of TINA in politics, the laughable emphasis on GDP in economic commentary and so on. We can make the case for more ‘new’ on the informal economy news, more social economy representatives on Question Time, and more housewives (and househusbands) on the Today programme. We might start to shift our ideological apparatus towards a place where it better reflects the underlying reality of a mixed-market economy rather than one dominated by the capitalist mode.

On the other hand, in practice it means we can ignore capitalism and maybe it will go away. For those of us who want to, we can take a decision to sidestep capitalism, we can buy social, buy green and buy local, build and encourage a more values-based progressive and inclusive (market) economy that works better for people and planet. We can support these alternative modes of production and those social, co-operative and commonist alternatives that will help us to reconnect where capitalism alienates, where owners, financiers, consumers and producers are more connected in a meaningful way. Over time, we will grow. There will be an alternative. 

Perhaps sometimes we need clowns—the court jesters are the only ones allowed to tell the truth.

Dan Gregory used to work at the Treasury and Cabinet Office. He now works under the banner of Common Capital at both a policy and practical level, supporting the sustainable funding and financing of community, mutual and social enterprises.

On one hand, taken in material terms, the underlying reality of the economy is not capitalist—bona fide, formal, institutional capitalism probably accounts for under 50% of GDP.


Info & Credits

Published in STIR magazine no.07, Autumn 2014

Written by Dan Gregory

Illustration by Germán Gullón