'The Death of Capitalism' by Richard Overy

In Britain before 1914 there was great confidence placed in the self-regulating character of all markets, large and small. The classical view that the principle of laissez faire would, on balance, always tend to the wider benefit of any community was made possible because of the special conditions that shaped the emergence of developed commercial and industrial states in Europe and the special place played by the British economy in stabilizing the international trading and financial markets around the popular rallying cry of Free Trade. Popular approval of laissez faire was the fruit of decades of economic and political practice from the mid-nineteenth century when it came to symbolize the emergence of not only modern consumerism but also of a progressive civil society.


After 1919, following the wartime experience of large-scale state mobilization of resources and destruction , Britain's economy arrived 'in the Doldrums', becalmed and stagnant, unable to sail back to the old-fashioned capitalism, but unable to move forward to a healthier economic climate. The Great War and its immediate aftermath produced in many people a consciousness, as Arnold Toynbee described it in a 1931 broadcast, 'of being swept along on a stream of dizzily rapid change, whose current was carrying us over a precipice that was going to be the greatest fall of man there ever had been – a very Niagara...a crash of Modern Civilization that will lick creation!' It was an historical moment of unstable transition, morbid apocalyptic contemplation and large-scale social anxiety.


Although politicians and businessmen maintained a strong pre-war aversion to challenging traditional market principles in a direct way, it became increasingly clear that in the face of 'the anarchy of individualist capitalism' and its 'modern' consequences that the state was now required to play a larger role in order to maintain stability or to encourage growth. The idea of the free market as the measure of economic health survived fitfully into the 1920s but there was a growing popular expectation that new economic mechanisms were necessary and widespread public interest in the arguments that arose from them.


For anyone on the left in British politics in the two decades after the end of the Great War the crisis of civilization was handcuffed to the long-expected death of the capitalist system. The obituaries were, as it turned out, written in indecent haste but at the time a great deal of British opinion, across the class divides, believed on the basis of the evidence all around them that capitalism's days were numbered.


In 1922 Beatrice and Sidney Webb, doyens of the intellectual left, wrote a short book on the spectacular rise and eventual collapse of British capitalism. The provisional title was to be “The Reign of Capitalism”, which may have been meant to convey the idea that here was a system ripe for abdication, but its evident ambiguity persuaded Sidney Webb a few weeks before publication to alter it to 'The Decay of Capitalist Civilization', which conveyed its central message directly.


The Webbs invited their fellow Fabian and playwright George Bernard Shaw to go over the introduction to make it a livelier read. In a choleric postcard to Beatrice, he protested that the book hardly needed a prologue and told Beatrice bluntly that what they had written for him to correct read like the words of 'a rather bored chairman opening a meeting', and the title the 'd-dest nonsense' of 'Gibbonesque pondorosity'. Never-the-less, he obliged Beatrice by removing some of the platitudes and padding of their original version, and injected into the introduction a more arresting sense of the terminal crisis faced by the modern age. He sensibly cut out 'we must at least admit the possibility, and even, as some might say, the practical certainty' and replaced it with the categorical assertion that capitalist civilization 'is dissolving before our eyes'. The Webb's conclusion, which by any standard was limp and verbose, he deleted in full, replacing it with a second prediction that capitalism, which had 'begun to decay before it reached maturity', would be viewed by historians of the future as little more than an episode, 'a Dark Age' between two greater historical epochs. This conclusion clearly did not satisfy the Webbs and they added a further three pages, burdened again with the temporizing clauses and dull phrasing that Shaw had removed from the remainder.

The central thesis of The Decay was a sustained indictment not only of the irrational character of a system based on naked profit-seeking, which pushed the worker into penury or unemployment and left the capitalist forced to seek other outlets for goods in imperial adventures or war, but above all of the moral bankruptcy of capitalism. It was this, the Webbs believed, that constituted Marx's most important contribution to the debate on the nature of capitalism. His economics ( full of 'pretentious blunders') had done little to serve the socialist cause; but Marx 'called the moral bluff of capitalism' and it was this ethical enlightenment, argued the Webbs, that capitalism could never extinguish.

In the eyes of the Webbs, the danger that the moral crisis of capitalism provoked was the anger of the saboteur – the curiously archaic term used to define the modern anti-capitalist revolutionary – which the Webbs feared might sweep away everything: 'capitalism need not hope to die quietly in its bed; it will die by violence, and civilization will die with it.” Later, Beatrice spoke of the the Soviet experiment in Russia as the complete instance of this decline and fall of capitalism.

The Webbs preferred the path they mapped out as good social democrats, where municipal ownership and regulation, an effective co-operative movement and trade union organization, and the systematic prevention of destitution that would slowly transform capitalism into something institutionally and morally distinct. From the decrepit, diseased form of laissez- faire capital would sprout a reinvigorated and healed community of rational and virtuous collaborators. If both sides chose instead to sabotage the path to social health, the result would threaten 'the existence of civilization'.

The Webbs continued to argue their case that the decay of civilization was in progress through to their deaths in the 1940s. This was the theme of Beatrice's BBC talk in July 1930 on the crisis of democratic capitalism in which she surveyed the grim choice between 'catastrophic upheaval' and 'a slow decay' of living standards, health, culture and 'general civilization.

J.A. Hobson was also one of the best-known popularizers of economic issues in Britain during the twilight years between the two great wars of the twentieth century, spending much of his career analyzing what he called 'The seeds of decay in Capitalism.” It was a view that infected the outlook of even those whose credentials were anything but politically radical or revolutionary. The fear that the capitalist order might decline or perish entirely unless some cure could be found for its evident failings was nourished on the difficulties faced by the developed world in adjusting to the changed post-war economic realities of uneven patterns of growth, an underlying residue of high levels of unemployment and poor trade performance.

Although Hobson's arguments have been taken more seriously by historians of recent years, they were not generally accepted by the academic economists of his day. Never-the-less, He enjoyed widespread popular approval in the 1930s. He is best remembered for the concept of 'under-consumption.' He argued that there existed a perpetual imbalance in capitalism between the capacity to produce goods and the capacity of ordinary people to consume them. This imbalance was due to the maldistribution of income: the rich saved too much and used their wealth either to invest in yet more capital goods, or spend it on luxuries, or unproductive speculation; the rest of the population had too little money to consume all that the system could produce so that periodically the rich stopped investing and created the conditions for mass unemployment and economic recession. The phenomena of over-saving and under-consumption was 'a fatal flaw in the capitalist system'. Capitalism in its unregulated, laissez-faire complexion could not from its very nature produce either maximum productivity or full employment but labored under the paradox of 'poverty in the midst of plenty'.

Hobson did not accept the socialist argument that the excess income should simply be taken from the rich and given to the poor but insisted that the issue was 'want of proportion', that a larger share of the national income should go to consumption and a smaller share to the generation of new forms of production. His approach to transcending market capitalism by a form of democratic socialism was evolutionary, 'a more gradual and discriminative socialism, which involved limited nationalization of socially important industries and utilities, reform of the tax system, the regulation of monopoly and the provision of adequate welfare to meet the needs of the disadvantaged, but which allowed market mechanisms to survive. The costs of welfare and limited state control were to be met from part of the large surplus that accrued to the rich and which so distorted the conditions of capitalist society.

One of the reasons for the great popularity of Hobson's Guide Through World Chaos (1932) was the emphasis he placed on the moral implications of his economics. A more rational proportion between consumption and saving was the key for millions to the enjoyment of greater welfare and leisure. He called this 'the vital income' element in economics, the possibility of leading a desirable life in all its aspects. A free existence means liberating human energies for love and friendship, knowledge and thought, joy and beauty, all goods, he concluded, that are neither marketed nor consumed.