The uncaring market

William Rees-Mogg

FALSE DAWN: THE DELUSIONS OF GLOBAL CAPITALISM by John Gray Granta, £17.99, pp. 234 John Gray is Professor of European Thought at the London School of Eco- nomics and he has written a traditional political theorist's book. In the late 19th century, Karl Marx was arguing that the contradictions of capitalism would destroy the capitalist system. In the first half of this century two world wars, the Russian and Chinese revolutions, and the great slump made it look as though Marx might well prove right. In the second half of the centu- ry, capitalism has made its come-back. Now John Gray, at the end of the century, is not the only person to argue that global capi- talism will

fracture and fragment, as mounting scarcities of resources and conflicts of interest among the world's great powers make international co-operation ever more difficult. A deepen- ing international anarchy is the human prospect.

In 100 years' time we shall know whether he was right; in 50 years' time it will still be too early to say.

This is not a political economist's book. The theoretical case for capitalist free markets as the most efficient structure for economic development is hardly examined. Milton Friedman's work receives only the briefest of passing mentions; it is said, in an unargued generalisation, that Thomas Hobbes and Thomas Malthus are better guides to the world that global laissez- faire has created than Adam Smith or Freidrich von Hayek.

This assertion seems the more strange as Malthus himself saw his own work on population theory as derived from Adam Smith. In the first chapter of the 1798 first edition of the Essay on Population, he writes:

The most important argument that I shall address is certainly not new. The principles on which it depends have been explained in part by Hume, and more at large by Dr Adam Smith.

However, this may not greatly matter. John Gray has the greatest respect for the power of the global market even though he deplores many of its consequences.

The world-historical movement that we call globalisation has momentum that is inexorable. We are not the masters of the technologies that drive the global economy; they condition us in many ways that we have not begun to understand. Institutions that would monitor or counteract their dangerous side-effects are lacking.

He looks back with affection to the liberal capitalism of the United States in the 1950s and 1960s, but sees that it cannot be restored; he admires German social-market capitalism but does not expect it to survive; Singapore gets a favourable mention, but now looks even less promising as a world model than when the book was in draft.

Essentially this is a pessimistic book. The global market is seen in terms of its undesired side-effects, but it is not thought that there is an alternative system which could replace it, nor is it argued that the bad side-effects can themselves be prevent- ed. Judged by these standards Karl Marx is a raging optimist; he at least expected that socialism would supersede capitalism and would prove a more benign system.

This pessimism is also contrary to May- nard Keynes's view that over time, and by capitalist means, the economic problems would be solved. It is 50 years since Keynes's death, and the economic problem has not been solved yet, but it is true that there are more than twice as many people on earth as when he died, with an average standard of living which is a multiple of the average at that time. This has not been achieved by socialism, which has been dis- carded even in Russia and China, but by global capitalism and new technology.

Nevertheless, the social costs are real enough. Global capitalism seems to work in much the same way as natural selection; it destroys those who fail to adapt, and rewards, often to an absurd degree, those who adapt successfully. There is no inher- ent morality in its outcomes; the mafia boss and the great white whale are similar exam- ples of successful predators. Darwinism, in all its forms, is morally neutral, which is why it is so shocking to human nature. This is indeed one of the weaknesses of capital- ism. It produces its results by competitive selection and not by moral choice.

When he looks at the negative moral consequences of particular market situa- tions, John Gray sees things which shock him: the disruption of communities; the break-up of the family; undue economic inequality, the spread of drugs and the 400,000 Americans, mostly black, who are imprisoned for drug offences; high struc- tural unemployment. He naturally protests against such evils. These disbenefits the market distributes with an impartial hand, just as it distributes its benefits of long life, material goods, jobs, opportunity and wealth. The market has the ruthlessness of nature itself; at one moment one is eating strawberries, at the next one is being eaten by a crocodile.

Repeatedly in history the negative side- effects of open market forces have threat- ened the peace and stability of mankind, yet competition has procured adaptation and survival. That is the message of Adam Smith, Malthus and indeed Darwin. John Gray is right to support social institutions which will redress some of the evils that flow from this process of survival of the fittest.

Yet he is probably wrong to believe that the system which has got us where we are is going to relapse in the next century into anarchy and servitude.