George Kerevan: Capitalism needs overhauled – not overthrown

The Occupy movement may have a point about the global economy. But don’t chuck the baby out with the bath water

A SPECTRE is haunting Europe and America – the spectre of anti-capitalism. Not the spectre of Communism, as old Charlie Marx predicted in 1848. The new “Occupation” movement that has spread like wildfire across 850 cities and 80 countries knows what it is against: corporate capitalism. But it is less coherent about what it wants to replace bankers with.

This lack of political focus makes the Occupation movement easy to dismiss. That would be a mistake. The sheer size and geographical ubiquity of this protest movement, never mind the spontaneity with which it has mushroomed, suggests it represents a genuine social phenomenon

Let’s start by recognising that it’s not just the tented Occupiers who are pissed off with capitalism. The credit crunch and ensuing economic downturn have made us all want to run into the street like Peter Finch in the movie Network, and shout: “I’m as mad as hell, and I’m not going to take this any more!”

But not many people want to give up their semi for a tent. Or surrender the chance of turning their degree in media studies into a well-paid career, in return for a stint on a collective farm. We are not against capitalism, we just want it to work the way it is supposed to – but with a bit of humanity and fairness. Actually, most of the Occupiers feel the same way. Read their websites and you’ll find scant reference to the failed collectivist agenda of the Stalinist era. There are a few nutcase nihilists – mostly young males with too much testosterone. But there are just as many eccentrics who want to outlaw usury, or go back to the gold standard.

The “Declaration of the Occupation of New York City” comes closest to outlining what the movement wants – a reform of capitalism rather than its overthrow. It is modelled unashamedly on the American Declaration of Independence. This time the enemy is not George III but nameless “corporations” that “place profit over people, self-interest over justice, and oppression over equality”.

Anyone who knows US history would recognise these populist sentiments are exactly those espoused by the Progressive Movement at the start of the 20th century. The Progressive manifesto of 1912 (“A Contract with the People”) states “the existing concentration of vast wealth under a corporate system … has placed in the hands of a few men enormous, secret, irresponsible power over the daily life of the citizen”.

The Progressives did not want capitalism abolished – they wanted it better regulated. They wanted corporate criminals sent to jail, big monopolies broken up and the tax system reformed to ensure social justice. Their modern successors want much the same thing. The trick is how to do this without dismantling the bits of capitalism that work.

Free markets antedate capitalism proper. They offer choice, supply wants, discover new products and bind people in friendly networks. Rely on state bureaucrats to decide what you need and you’ll end up in Stalinist Russia, where the male planners forgot about sanitary towels.

Capitalism adds to free markets by centralising society’s savings and investing them where they get the biggest financial return. That maximises output, creating a gigantic, perpetual growth machine. You can object. The UK cat and dog food market is close to £2 billion per annum. Is that moral, when folk are starving? Yet experience shows that relying on politicians to allocate capital investment only leads to corruption, cronyism and waste.

Hasn’t the capitalist wonder machine faltered? Not at a global level. In 2000, there were six billion people on the planet, and the GDP per capita was £4,560. Last year, world population was nearly seven billion yet – despite the crisis – GDP per head had gone up to £7,100. That’s a 55 per cent increase. GDP growth isn’t everything, the Occupiers argue. True, but capitalism has supplied the wealth and technology that improves life in general. Global infant mortality in 2000 was 54 per 1,000 live births: in 2010, that had dropped to 41.6. Life expectancy on planet Earth was 64 in 2000; last year, it was 67.

The crisis in the capitalist system in recent years is not systemic. The fault lay in separating lending from genuine savings and productive investment, and letting banks issue credit to each other in a mad rush to generate paper profits and obscene bonuses. Governments connived in this by pressuring central banks to pump artificial liquidity into the private banking system. All this we can change.

The Occupiers and the old Progressives are correct to want banks better regulated and corporate monopolies broken up. The benchmark in doing so should be to create a better capitalism. The results would be illuminating, even for the most stringent anti-capitalist. For instance, once you eliminate casino speculation in investment banking, global GDP growth would settle at a rate determined by real savings and productivity. Such “steady state” growth would have a more benign impact on the environment.

Of course, capitalism has failings. But it’s the least-worst system we have evolved. Yes, it’s destructive, but it’s also endlessly creative.

Also, the poor are not poor because some nasty capitalist took what was theirs – the left-wing fallacy. Nor are they poor because they are feckless – the right-wing fallacy. The poor are poor in the absence of capital investment to create jobs. That we can do something about.

Capitalism has always been marked by booms and recessions, because of the uneven nature of technological progress and the unfortunate inability of human beings to be able to guess the future correctly. I see little hope of eliminating either defect. However, for the same reason, I remain supremely confident the current downturn will give way to another upswing.

The capitalist future remains bright. There is no sign that scientific discovery is lessening. We are more creative than ever in the arts. And, despite the credit crunch, there is no shortage of investment capital on a global scale. Above all, humans want to improve their lot. Go ask them at your nearest tent.