With so much churn in the capitalist world, it might be time to wonder if capitalism has failed. Geoff Mulgan's book is set at a philosophical level. He looks at the business world not only through an economic lens, but also from a moral and ethical viewpoint. At the same time, he keeps the thoughts and examples largely restricted to the world of business, except in a brilliant chapter in which he traces how monarchies have dissipated, making way for democracies, hinting at another "form" of governance in which the world of business could operate. Such attempts were made in the past, but they ran counter to the predatory tendencies of capitalism rather than the creative tendencies of capitalism.
The biggest counter-capitalist thought came from Karl Marx. And when we discuss Marx, the discourse has to be raised to a philosophical level - because Marx transcends the world of business and government, and looks at the phenomenon from a societal point of view. Although Mr Mulgan's book is set at a philosophical level, it examines capitalism as a mere tool. That is because capitalism itself does not transcend commerce. I use the word "tool" deliberately, because it could harm or help depending on the use we put it to. The underlying argument in the book is an acceptance of capitalism and an exploration of how it could be saved from predators if used constructively.
This quote is evidence: "…[Marx] misread the ability of capitalism to respond to threats and pressures, and in particular he misread how well it would be able to spread wealth as well as hoarding it. That the distribution of wealth was often forced on it by striking workers, or reforming governments, is one of the paradoxes of history. If capitalism had been left to the capitalists it probably would have destroyed itself. Instead, the capitalists were bullied into saving themselves."
The questioning of the future of capitalism follows arguments on capitalism's constructiveness. Mr Mulgan does not find an inherent design feature in capitalism that ensures that capitalists do not behave like locusts. His examples show predatory practices - like the genetically modified "terminator" seeds. Such technologies also get protection and it takes a while before non-capitalist forces (like the state) make the capitalists behave.
Capitalism, at best, provides a framework to do business. This framework has capital at its centre and rewards it with all the residues after other factors of production have been paid. In a utopian world of perfect competition, there would be no excessive rent paid to a single factor of production. Capitalism, however, does not provide a fix for aberrations. The fix should come from capitalists themselves - for instance, firms such as Patagonia, Selco Solar, Narayana Hrudayalaya, which suo motu decide to restrict the residual claims and ensure that the returns from the business are spread widely. Or the fix would come from society. In a brilliant chapter titled "New Accommodations", Mr Mulgan talks about a "small town of Saltsjobaden near Stockholm where the representatives of business, government and unions agreed to create a society with no rich individuals but rich concerns". More often than not, such initiatives come from outside rather than inside.
He concludes with a range of ideas. Some of these move away from the centrality of capital - an alternative measure of exchange that looks at time and moves beyond money. How do we change the measure of performance and introduce multiple measures of performance? These ideas come from beyond business; from the larger society of which business is a subset.
One of the pleasures of reading this book is that Mr Mulgan provides a range of examples: the Honey Bee network that documents innovations; the radical positive outcomes that the UID exercise in India could have in personalising transactions with the government; and Narayana Hrudayalaya.
Given the range of discussion, it is surprising that Mr Mulgan does not devote attention to a viable business model that questioned the primacy of capital. Co-operatives moved the locus away from capital to "patronage", making capital one more factor of production with residual profits going to people providing the service or "patronage". Co-operatives propagated equality of vote without discrimination. He also does not discuss the social business model that is being propagated by Muhammad Yunus, a model that rejects the accumulative tendency of capitalism. If Mr Mulgan had built many more such counter-capitalist ideas in the book, his answers to the question on the future of capitalism would have been less tentative.
All the same, this is a brilliant book, full of great ideas, provoking us to pause and think. He ends the book by asking the reader to imagine the identity of a city. How do we define it? Through palaces and forts; churches and temples; railway stations, airports and museums; or the skyline of Manhattan? If the image of the US is predominantly the Manhattan skyline, we know that capitalism is still around.
The reviewer is visiting faculty, Indian Institute of Management, Bangalore.
mssriram@gmail.com
THE LOCUST AND THE BEE
Predators and Creators in Capitalism's Future
Geoff Mulgan
Princeton University Press; 334 pages
