The notion of a more ethical and socially responsible version of capitalism is a cosmetic illusion which does not alter the fundamental nature of the system, argues John Clarke

There is a very long history behind the notion that capitalism, while it has a sinful side to its nature, can still be redeemed. In 1843, Charles Dickens offered a tale of the spectacular redemption of the remorseful capitalist, Ebeneezer Scrooge. ‘A Christmas Carol’ is a cherished work of literature that contains powerful elements of social commentary but it also delivers the message that capitalism, though it may often be cruel, can also be a responsible and caring affair.

Over the many years that have elapsed since Scrooge ‘became as good a friend, as good a master, and as good a man, as the good old city knew,’ there have been many attempts, with much less literary merit, to develop the theme of a caring capitalism. In recent times the infamous International Monetary Fund (IMF), has faced its own version of the three ghosts of Christmas, in the form of ‘Rising anger at the increasing inequality blamed on globalization.’

Compassionate capitalism

In 2019, the IMF’s acting managing director, David Lipton, suggested that capitalism, while it “has been the engine behind so much of the success we have experienced,” is also “an imperfect system in need of a course correction.” While the IMF has continued to act as an enforcer for the neoliberal order, imposing harsh conditions on some of the poorest countries on earth, it has taken to issuing disconnected and hypocritical calls for a more compassionate world order.

Since the onset of the pandemic and its devastating impacts, the IMF blog has become a veritable confession booth for global capitalism. It is quite remarkable that the same organisation that provoked the phenomenon known as the ‘IMF riot’ can now piously declare that:

“The pandemic is a test of social solidarity, cohesion, and government effectiveness. Likewise, when the crisis has eased, if governments are perceived as having supported rich individuals and corporations more generously than those sacrificing and hurting the most, there will be a risk of political backlash or social unrest. Policymakers need to deliver…policies that foster more equal distribution of incomes and access to government services.”

The World Economic Forum has also joined in on the act with considerable enthusiasm. The exploiters and their assorted enablers who gather at each year at Davos, in the Swiss Alps, are calling for nothing less than ‘The Great Reset’ of the capitalist system that they claim will involve ‘a new social contract that honours the dignity of every human being.’ Scrooge’s erratic acts of charity were positively amateurish compared to the grand visions of 21st century ‘stakeholder capitalism.’

In 2019, the Business Roundtable, a very powerful and enormously influential voice of the US capitalist class, decisively embraced this conciliatory and contrite approach. Declaring that ‘The American dream is alive, but fraying,” the organisation issued a new set of its ‘Principles of Corporate Governance.’ In this revised version, it abandoned its longstanding promotion of ‘shareholder primacy’ and adopted the formal position that private companies should be “committed to meeting the needs of all stakeholders.” These are now defined as “customers, employees, suppliers, communities and shareholders.”

These examples point to a desire on the part of very powerful capitalist interests to put some distance between themselves and the crudity of Milton Friedman’s frank declaration that “the social responsibility of business is to increase profits.” This isn’t to suggest, of course, that there is any substantive difference of opinion with Friedman’s view of things. However, these-crisis ridden and uncertain times call for a far more image conscious brand of global exploitation than sufficed at the dawn of the neoliberal era.

It would be wrong to assume, however, that the stakeholder capitalism approach is simply a quest for legitimacy in the face of rising anger. It actually represents a drive by the ‘business community’ to increase the level of control it exerts over public policy directions. Bringing its wealth and power to the table at the very time when public services are being undermined and privatised, the corporate ‘community partner’ is working to ensure that choices are made that favour its profit driven priorities. As one in-depth study of the issue puts it:

“Through colonising the ‘public’ world of governments, international organisations and NGOs, this ‘post-democratic’ project of redesigning institutions to insulate capitalism from resurgent popular democratic pressures linked to deepening crises effectively depoliticises the continued economic dominance of capital accumulation over society and nature. Indeed, despite pretensions to move beyond profit maximisation, corporations’ attempts to satisfy extra-economic interests remain firmly grounded in the same capitalist market imperatives that proponents of ‘stakeholder capitalism’ now claim to be addressing.”

The real world isn’t subject to the liberal creativity of Charles Dickens and hopes for a kinder gentler pursuit of profits should be taken with many grains of salt.

Dangerous illusion

The dangerous illusion of ‘stakeholder capitalism’ has been fully supported and enthusiastically promoted by the Biden administration and with considerable effect. In the summer of 2020, “the largest and most diverse antiracist protest movement in US history was surging powerfully forward” in the wake of the police murder of George Floyd in Minneapolis. The Biden campaign, with its empty promise to ‘build back better,’ was enormously successful in demobilising that struggle by channelling a great part of it into in electoral activity. 

This diverting of a mass movement of social resistance points to a major danger with the false notion that capitalism can be made socially just or environmentally friendly. The message can reinforce reformist illusions and resonate on the left to a serious degree. Even more than the financial crisis and Great Recession of 2007-2010, the shock of the pandemic fuelled expectations that a period of sustained economic stimulation and class compromise was opening up. The conflict in Ukraine, the cost of living crisis and the driving up of interest rates in the face of it, are all strong evidence that such expectations are unrealistic and don’t provide a basis for effective political action.

Even as the IMF continues to issue its calls for ‘social solidarity, cohesion, and government effectiveness,’ preparations for intensified class war are being developed. Influential voices are now being raised in support of much more aggressive measures to drive up interest rates. The Deutsche Bank asserts that the US Federal Reserve has “never been able to correct” inflationary pressure “without pushing the economy into a significant recession.” It coolly asserts that there is insufficient unemployment and emphatically declares that “Something stronger than a mild recession will be needed to do the job.”

Adam Posen, formerly with the Bank of England and now representing a Washington based think-tank is convinced the BofE must now shrink the economy. “It is duty bound to bring inflation down after more than a year when it has been more than 2 percentage points above its 2% target level during a period of full employment,” he declares. For some years now, there have been those within the leading institutions of global capitalism who have argued that zero interest rates and other measures used to try and maintain a sluggish economic recovery simply weren’t sustainable and that a return to the methods of ‘creative destruction’ were called for. The inflationary crisis has given this view a much firmer footing and it is gaining ground accordingly.

In 2019, Martin Wolf was thundering against ‘rigged capitalism’ and telling the readers of the Financial Times that:

“We need a dynamic capitalist economy that gives everybody a justified belief that they can share in the benefits. What we increasingly seem to have instead is an unstable rentier capitalism, weakened competition, feeble productivity growth, high inequality and, not coincidentally, an increasingly degraded democracy.”

Such fine words may have their uses but a round of supply shocks and the imperatives of global rivalry playing out in the Ukraine have made them much less fashionable. The Financial Times’ European economics commentator, Martin Sandbu, is now offering a somewhat different view of things. For him, it has become a question of preparing the public for a ‘war economy’ along with all the hardships and sacrifices that go with it. Sandbu was even so obliging as to draft a statement for political leaders wanting to convey this message. Stopping just short of a call to fight on the beaches, it declares that “One thing like a wartime financial system is being imposed on us — not of our selecting, however we should not shrink from it. That requires all of us to place the widespread good first.”

The glowing promises of a new ‘stakeholder capitalism’ are as hollow as the call for all shoulders to the wheel in the service of a ‘war economy’ is impossible to accept. One offers partnership with the capitalists on the false promise of changed ways and jam tomorrow, while the other demands willing sacrifices in the service of supposed ‘common interests’ but both are cynical and false. The question is posed of who will pay for the multi-dimensional crisis of capitalism that is now unfolding and working class people must utterly refuse to foot the bill.