Making Money: The Two Failings of Capitalism

This month‘s edition of Lancashire Life lists the county’s thirty richest persons. Though some of their huge wealth is inherited, much of it was made in business. The poorest of the thirty is still worth over a hundred million pounds. The capitalist system that allows this mass wealth creation covers almost every country, yet it attracts much complaint and protest. Where does it begin?

In Padua, 1304, Giotto di Bondone painted a fresco in the Scrovegni Chapel, including a scene of Jesus violently removing money lenders from the temple (see picture above, which is in the public domain). In fact, Jesus cleansed the temple of money-changers, but these were not the issue in Giotto’s day; renaissance Italy saw the start of modern banking, with many fortunes made from usury. This is part of a religious tradition that claims buying and selling are incompatible with spirituality; money and wealth are the sworn enemies of godliness and virtue. 

Venetian Francisan Friar, Luca Bartolomeo de Paciol, published his book Suma De Arithmetica (1494), on the seemingly dull topic of accounting, advocating the now ubiquitous double-entry book-keeping. He argued that our dealings with money are not governed by fate, or divine reward and punishment; wealth can be acquired and lost scientifically, due to diligence and hard work, or idleness and foolishness. Thus, he began capitalism’s rehabilitation.

Max Weber’s 1905 The Protestant Ethics and Spirit of Capitalism cites John Calvin, preaching the importance of the virtues of hard work, self-denial, honesty, and integrity, back in Geneva, in 1555. Although Calvin himself was never rich, Weber argues that his teachings encouraged the development of modern capitalism. By never indulging themselves, never having lavish lifestyles, good Calvinists would invest surplus money back into the business. Good businessmen, thought Calvin, were more pleasing to God than being a noble warrior or pious monk. This sober, godly lifestyle was also a clue as to God’s unfathomable election.

These ideas were well reflected in 1670’s Delft, in the Calvinist Dutch Republic, the world’s first truly capitalist mercantile nation. Hard working merchants were revered, lazy aristocrats looked down upon. Churches gave sermons about thrift and hard work. Across the channel in Protestant England, a work was published in 1776: An Inquiry into the Nature and Causes of the Wealth of Nations by Scotsman Adam Smith LLD.

Smith examined why capitalist economies grow. He argued that slavery was wrong, not so much because of its moral opprobrium, but its inefficiency. Violence is less of an incentive than money for a worker; wages are cheaper than the purchasing and maintenance of slaves. We have here a glimpse into system’s major flaws- its hard-faced, objective consideration of its workers.

He also suggested that business should maximise profit by specialising these same workers. He gave the example of pin making. One man can make 20 pins per day, he claimed; ten workers can make 48,000 if correctly arranged and managed- the ‘division of labour’. In other words, each employee simply concentrates on one aspect of the production; he will become expert at this, and dextrous in its execution.

He went on to claim that successful business goes on to improve the whole of society- our desire for profit will help others by our providing them with goods and services. Smith said:

‘It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own self-interest’.

In other words, those tradesmen provide us with food in order to make a living, not that we might be fed. Another area in which society as a whole benefits from thriving enterprise is taxation, a topic upon which Smith was rather more bashful. By taxing the profits of business, the state can provide public amenities such as schools and hospitals. A loss or breaking-even cannot be taxed; it’s therefore in our interest for businesses to thrive.

In the nineteenth century, the British economy was the largest in the world. We excelled at exporting cotton fabrics, steel, wool and all sorts of manufactured items. The capitalist class triumphed; businessmen and entrepreneurs flourished. This success was not without its critics, for it did come at a price. Charles Dickens’ 1854 novel Hard Times, set in Coketown, perhaps based on either Preston or Manchester, criticised the economic status quo. Mr Gradgrind, the utilitarian School Board superintendent, who, though no industrialist, approved of the laissez faire economics of his day, summed up Dickens’ views of that class. The exploitation of workers, children and adults alike, were hallmarks of the early to mid-Victorian age. Of Coketown, Dickens says

‘It was a town of brick red, or of brick that would have been red if the smoke and ashes had allowed it; but as matters stood it was a town of unnatural red and black like the painted face of a savage’.

Dickens condemns unrestrained capitalism because it required the producers to live in such poor conditions; it justified in the minds of many the employing of small children or letting people starve when they had reached the end of their working lives.

Joining this mid-century attack on Victorian values came, in 1860, John Ruskin’s Unto this Last. He took aim at capitalism’s other side, that of consumption. Although like Dickens, he lamented the workers’ conditions and the loss to our natural environment, he really objected to large fortunes being built upon selling people silly items. He lamented the acquisition of such things as embroidered bonnets, corsets, elaborate sideboards, tubs of moustache grease and other such nik-naks and ‘fancy goods’.

‘…we pour our whole masculine energy into the false business of money-making; and having no true emotion, we must have false emotions dressed up for us to play with, not innocently, as children with dolls, but guiltily and darkly.’

That we should spoil our world and exploit our people for such foolish items was beyond his belief.

‘That country is the richest which nourishes the greatest numbers of noble and happy human beings; that man is richest, who, having perfected the functions of his own life to the utmost, has also the widest helpful influence, both personal, and by means of his possessions, over the lives of others.’

Money should not just be made morally but spent morally also. He contrasted the beauty of Venice with the filth of Manchester and any other British industrial city.

Let’s leap forward to Berlin, the capital city of the German Democratic Republic (GDR), 1963. Of course, it wasn’t democratic at all, being the official name for Communist East Germany. Its leader, Walter Ulbricht, promulgated a break from the usual and dreary ‘five-year plans’ beloved of communist states. His Neues Okonomisches System (NOS) or new economic system sought to solve the two chief failings of capitalism: it guaranteed good conditions for its workers by building housing estates, holidays camps and state schools. It also determined to ignore fripperies like pop music and blue jeans, offering a more wholesome entertainment centred around the arts, theatre, Plato and Marx. Uplifting tv programmes about tractor production and current affairs were designed to inspire the workers. As the State Radio Committee put it in 1960: “By means of ideological and educational broadcasts from the main centres of the republic, radio and television aid the building-up and victory of socialism”. However, it was not the success Ulbricht had intended. Even the Party’s General Secretary, Erich Honecker, called in 1971 for TV professionals to “overcome a certain boredom”. It wasn’t the poor television schedules that threatened the state, however. It was coffee.

In Dresden, in 1976, riots broke out about the unavailability of coffee. Steep rises in prices meant that the GDR simply couldn’t afford to import it in the quantities needed. Eventually, the Politburo removed all coffee from shops, replacing it with Kaffee Mix, a cheaper, communist coffee. Made of 51% coffee mixed with 49% chicory, rye and sugar beet, the communist leadership thought it had solved the problem. The rioters begged to differ.

The Ministerium für Staatssicherheit, popularly but not affectionately known as the Stasi, the secret police, were used to quell the demonstrations. Surely this was an unintended tribute to capitalism which is always most proficient at providing us with the things we want, be that coffee or moustache grease. 

When the first East Germans escaped west through the fall of the wall in 1989, they were amazed to see the quantities and varieties of food available at Hamburg’s Edeka supermarket. Behold, the productive capacities of capitalism! Indeed, on my two visits to communist Cuba, the government guides, with raised eyebrows, explained how the state had had to permit farmers operating black market stalls, without which the population would starve. ‘Told you so’, ripostes Adam Smith.

So if communism failed and capitalism reigns triumphantly, why were there mass protests in capitalism’s heartland, America, in 1999? The World Trade Organisation was meeting in Seattle, and over 40,000 demonstrators decided to share their feelings. This, after a decade of huge economic growth and the obvious failure of communism. These people were not siding with Smith and Gates, but with Dickens, Ruskin and arguably Jesus Christ Himself. Despite its success in giving us things we want, its two fundamental flaws continue to snap at its heels:

It ignores the suffering of workers unless regularly prodded not to;

The wealth of companies is often built upon things we simply don’t need.

In 2015, Apple recorded the biggest annual profit in history with net income of $53.4bn. Every second, it made a profit of $1693.11. At the same time, it was the cause of suffering and abuse of workers employed by the Hon Hai Precision Industry Co., Ltd., trading as Foxconn Technology Group. The BBC’s Panorama show claimed it found standards on workers' hours, ID cards, dormitories, work meetings and juvenile workers were all being breached at these factories. And for what reason? Smartwatches. Watches that do more than telling the time. 

Jesus said: “For what profits a man if he gains the whole world but loses his own soul?”