Blog: Tuesday, 30 March 2021

Capitalism may have brought us a dramatic increase in economic growth, but its post-war neo-liberal incarnation seems to have created exclusive wealth for the few rather than inclusive prosperity for the many. Its public image in recent years clearly reflects widespread disgruntlement and the call for institutional transformation is sounding stronger and stronger. Martin de Jong wonders whether the familiar boardgame Monopoly can throw any light on the future of capitalism.

A boiling combination of tactics and hazard

Hasbro’s Monopoly – who among us has not played it as a child? Making dice-based moves across the family board game, eagerly buying up streets in various cities as long as personal liquidity allows for it. Then planting more and more houses and hotels in those streets financed with the moderate gains made from visitors of one’s yet-undecorated streets. And finally hoping that silliness and the bad luck of opponents forces them to frequently use the expensive services controlled by you, merciless landlord, and go bust. You win and they lose: it takes many stressful, enjoyable hours before the game is over, but its glorious outcome always makes your day. Capital accumulation in action. It admittedly boils down to a combination of tactics and hazard, but the eventual victory at least feels well-deserved. You certainly can be, and are, the best capitalist of them all. And the dollar signs in your eyes? Well, mummy likes peace in the family enough to tell everybody it is just a game. No harm intended. And a fine crash-course for beginners in capitalism it is!

Toothless and speechless before an end-of-age

Last week, sadly, newspapers reported that Hasbro is of the opinion that their illustrious game has become outdated and now waits for a 21st century modernization. It is not inclusive enough anymore. Beauty contests are no longer politically defendable and receiving amnesty to escape from jail for just 50 Euros may unduly favor corrupt criminals anno 2021. Suggestions for improvement are welcome. Reading these reports, I wondered whether the same necessity for a thorough update also applies to the adult and real-world bugaboo version of Monopoly called latter day ‘Capitalism’. In academic publications, in newspapers and in popular discussion, one can be forgiven for having the impression that ‘capitalism’ and ‘neo-liberalism’ have become the culprits and responsible forces for many modern evils and urgently require readjustment in the light of current political and economic values.

Inequality in wealth and income have grown dramatically in many parts of the world since 1980. Serious shortages at the housing market disempower young couples in need of their own space to live and offer their offspring insufficient space for maneuver while they themselves continuously work from home because of COVID-19. People from ethnic minorities suffer systematic discrimination at the labor market resulting in chronic underutilization of their talents. Farmers continue to break nitrogen rules, because they are caught in agricultural production processes that harm themselves, the quality of plant and animal life, the natural environment and the health of carefree consumers. Unfortunately, toothless and speechless left-wing opposition parties that promise to fix those evils lose election after election. Center-right government parties adopt diluted but ultimately inconsequential versions of those progressive standpoints while staying comfortably in power. And far-right parties win votes by claiming that all the above problems are caused by foreigners of strange colors and objectionable ideas and proclaim that COVID is a hallucination. But they scream this around while recovering from time spent in Intensive Care Units of the regional hospital brought about by that very illusory disease. What on earth is happening here? Is this all an end-of-age experience? Like the eschatological return of the Messiah by disoriented believers in monotheistic religions, the arrival of a new era after hateful capitalism has also been predicted repeatedly by quite a few desperate social scientists. Could it indeed be that the time has finally come? What is capitalism anyway?


A ruthless analyst dissects capitalism

Capitalism tends to be associated with the existence of markets, healthy private firms, de jure open and fair competition, relentless efficiency, an incessant drive for technological innovation and ever-growing levels of prosperity creation. But it is also believed to be accompanied by the perverse influence of overly flexible land and labor contracts, absence of good public services, government-endorsed de facto monopoly or oligopoly, systematic exploitation and poverty of the underclasses, excessive power to financial traders and an endless drive towards accumulating more and more wealth. Truth be told, under specific historical circumstances and institutional constellations all the above claims can be true. Until the year 2000, the former positive qualifications dominated the public and political agenda leading to the rise of neo-liberalism and monetarism in public policies. After that magical year, these two gradually began to lose their popularity and the clamor for corrective action began to gain traction. But as we have learned from history: institutional evolution is a path-dependent thingy. Global optima do not exist, only local sub-optima. And perhaps more importantly: revolutions hurt big time and generate massive societal instability. Marx was a great and valuable scholar, but wrong in many ways. So, let us not make the same mistakes again: where do we go from here?

Amidst conceptual disarray and ideological discourse, one would almost forget that capitalism revolves around just one key word: capital. This term has been used in different connotations by different authors, but it is worthwhile trying to make sense of that disjointed debate. In Conceptualizing capitalism, economic philosopher Geoffrey Hodgson, always irritatingly adequate and accurate in his conceptualizations as well as ruthless without even the slightest suspicion of a forgiving smile when dissecting the thoughts of peers, puts it as follows. In a minimum version, capital refers to liquid cash plus collateralizable assets. In a maximum version, all sorts of things that may be very precious but can or should not really be quantified or monetarized are also included. The former refers to hard cash, physical objects and digital documents that can easily be converted into monetary capital. The latter also includes issues such as educational level, societal trust in the honesty of fellow human beings, cultural awareness and beautiful natural ecosystems. They go by the names human capital, social capital, cultural capital and natural capital, all of which Hodgson disqualifies as pernicious misnomers because they are not really convertible into monetary value and therefore lead to conceptual obfuscation. I was a bit puzzled by the harshness of his assertions, but what it does indicate is a strong wish of scholars and policymakers to approach things they see as valuable in terms of ‘capital’. Capital apparently is an inexorable attractor: what is quantified and monetized gets measured, what is measured gets included in analytical frameworks and makes it to the next round of economic decision-making. Since the remainder is excluded from view and drops out of the selection of policy options that matter, it tries to cloak itself as ‘capital’ too.


The great intoxicator through the centuries

Capital is also the great personal intoxicator, as people discover once they acquire great skills in the job/joy of accumulating it. How many high value shares and options in the stock-market are enough? How many expensive houses do we wish to own as speculative objects? The more of this we acquire, the more we feel it is not enough. Invest, collect and re-invest, withdraw and re-reinvest. There have been days when money was only a piece of metal which replaced barter for acquiring exotic things one’s own tribe was unable to produce. There have been times when it was merely used to buy groceries at regional markets where traders that served the entire region convened. But once money acquired additional functions as a unit of account and a store of value, alongside its original role as simply a medium of exchange, it began to work its own magic and the foundations for Hasbro’s Monopoly were laid. This does not imply that capitalism has not evolved over time. In its early agricultural phase, it was primarily the production factors of land and labor which prevailed while capital only began to matter when crops were traded at markets. Knowledge and technology barely came into play at all in those peaceful, unambitious years. Capitalism’s industrial phase saw a decrease in the strategic role of land, a gradual increase in the importance of knowledge and technology and the heydays of the interface between labor and capital. And closer to the now, the tremendous growth in technological development and the intensity of data use can be said to have ushered in an era where the interplay between knowledge and technology on the one hand and labor on the other occupies the foreground, while capital and land continue to matter a great deal in the back. In a sense, this has made the shape of capitalism more complex than ever before, but certainly not less relevant. Capitalism is here to stay as long as the lure of capital as the ultimate driver of success, stability and (for some) happiness, and therefore the most central production factor, remains irresistible. Humanity is unlikely to get rid of capitalism any time soon, since money as a medium of exchange, account and hoarding will not evaporate overnight. But this is obviously not where our story should end.


Path-dependence for caterpillars

In its urge to acquire more wealth for more people, humanity has through the past few centuries belaboring planet earth to the extent that most natural resources have been transformed into artificial waste. This process began in the early days with massive deforestation for the benefit of agriculture and now seems to end with unprecedented amounts of greenhouse gas emission to sustain high-carbon processes of industrial production and consumption. Natural capital, if any such thing exists, is in its death throes. Our ancestors have managed to do away with slavery and feudalism, but also awarded Nobel prizes to scholars who deal with family life as if it were a market and consider “efficiency” the one and only moral value to be actively pursued. But assuming that legality and ethics are never really an issue, dear reader, how many units of utility is your mother worth to you after she has just complimented you on your Monopoly performance? How many years of our lives would we enjoy if our love-life was based upon minimum input for maximum output, or if children could dispense with their time-consuming curiosity to learn new things from a good book because it could be read in a split second? Capitalism as it has been practiced thus far is increasingly characterized by destructive commodification and marketing techniques which help us to crave material things and immaterial experiences we never thought we would ever want. We manipulate our preferences and countless commercial forces around us manipulate our preferences too. Capitalism has made us all Very Hungry Caterpillars, whose unlimited appetite is never satisfied. Living according to Kate Raworth’s doughnut economy is further away from reality than ever, but we must fear it is the only way for capitalism to survive the next couple of centuries.

All is not lost, although this sounds rather like a platitude to comfort people into thinking that we can still save the environment if we act fast enough. We know from many authors that there are varieties of capitalism, with Britain and Germany presented as the respective prototypes of liberal and coordinated market economies. We know from experts on China’s economic system that communist citizens are endowed with admirable capitalist skills. And we have learned that customers with thin wallets in African countries pick up new hi-tech applications at low prices thus skipping various stages of technological development previously thought to be indispensable. If historical evolution was path-dependent, then so too will our future be. But this does not mean we have no crucial legal and cultural choices to make. If different institutional patterns affect the environmental and social impact of our production and consumption behaviors differently, we should know them and change them. If particular ways of governing the land-labor-capital-knowledge production nexus have demonstrable consequences for the access of the uneducated to digitized information that concerns them directly, this should be part of our policy equation.


The future of gaming for 7.85 billion Gollums

In Capitalism without Capital, Jonathan Haskel and Stian Westlake emphasize how intangible assets have superseded the production and use of tangible products in the early 21st century economy. Design, branding and software now represent higher economic value than machinery, buildings and computers. Monetary investment in the former has exceeded that in the latter. Ownership and control of data, information and knowledge have become a core field for understanding the operations of the modern capitalist system and will allow us to prepare for and influence the future. Haskel and Westlake may have been overly optimistic about the disappearance of capital, however. It is far too deeply ingrained in everything we think and act upon: it is profoundly institutionalized in any governance system, nay it is its essence. Capitalism without capital is a stunning title for a book, but clearly an illusion. As long as the world’s 7.85 billion-plus population keep on believing in metal coins, paper banknotes or their digital representations with Arabic numbers on them as a postmodern version of King Arthur’s Holy Grail or of J.R.R. Tolkien’s Magical Ring, any lord’s inextinguishable desire can be ignited. We should stay on our guard. Never forget that humans are merely Gollums!

So, Hasbro has asked us for suggestions for updating its game of Monopoly. Fair enough. On the face of it, it appears that we should go quite a bit further than changing formulations on the Chance and Community Chest cards as originally requested. It is too late for political correctness. Either we do away with the money and return to barter. Anyone? Or we change the rules of the game such that we include knowledge and technology next to land, labor and capital as the fourth production factor and drastically change the institutional rules of the game. Hasbro should generate a government with clout to look at both allocation and distribution. It introduces sternly guarded checks and balances in governance, promotes responsible business conduct among the private players way beyond the regular window-dressing in sustainability reporting and confronts players with a situation of limited resources. But most importantly, nobody should become the one and only winning capitalist with all others dying next to them. You love your mother and life is not a game, is it?

Prof.dr. W.M. (Martin) de Jong
Professor of Dynamics of Inclusive Properity
Rotterdam School of Management (RSM)
Erasmus University Rotterdam
Martin de Jong

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