The real reason why capitalism always wins

Telegraph

04-05-2025

One of the joys of Capitalism and Its Critics, John Cassidy's unexpectedly lively romp through the two-and-a-half-century history of capitalism, is its fine sense for dramatic reversals. Nearly a century ago, for instance, John Maynard Keynes looked into his crystal ball and saw a world of plenty. On average, the Cambridge economist wrote in Economic Possibilities for Our Grandchildren (1930), his generation's grandchildren would be eight times better off than his contemporaries in 1930. Better yet, if capital accumulation and productivity continued to rise steadily, by 1960 a 15-hour working week would be commonplace in industrial nations such as Britain.
This was an odd moment to have had utopian dreams. Back in 1930, industrial capitalism seemed to be in a doom spiral. 'What the bourgeoisie produces, above all, are its own grave diggers,' Marx and Engels wrote gleefully in The Communist Manifesto, and to many across the West, the catastrophic global effects of 1929's Wall Street Crash might have suggested that capitalism was terminally ill. Across America, homeless encampments called Hoovervilles, after then-US president Herbert Hoover, were springing up; a National Hunger March arrived in London in October 1932; the following year, Adolf Hitler was sworn in as German chancellor, vowing to revive a nation crushed by hyperinflation and unemployment.
And yet, despite Marxist predictions, the last top-hatted capitalist has not yet been strangled with his own entrails by horny-handed proletarians. Instead, in a dramatic reversal, capitalism may have buried its critics.
In Cassidy's hands, rarely has what Thomas Carlyle called the 'dismal science' been so jaunty. Yes, Capitalism and its Critics is filled with Kuznets curves, post-endogenous growth theory and Gini coefficients; but I predict it'll become the intelligent beach read of the summer. It's effectively a zombie tale in which the mystery is why capitalism, having so many ill-wishers and so many chronic health problems, keeps rising anew from each crisis – be it the 1930s Great Depression or 2008 financial crisis – even stronger and more resilient.
Over 28 punchy, rigorous yet engagingly peopled chapters, Cassidy not only explains the economic theories of Marx, Adam Smith, David Ricardo and Milton Friedman – people of whom no smart person has any business being ignorant – but introduces us to a fabulous cast of lesser-known characters: Gandhi's economist JC Kumarappa, degrowth guru Nicholas Georgescu-Roegen and the cudgel-wielding toughs behind Luddism. The last of these are especially intriguing: Cassidy suggests that the Luddites had a point in terminating the machines that destroyed their livelihoods and they might even offer us a blueprint for how to avoid being made redundant by AI.
Cassidy depicts capitalism as a survival machine, rather like Richard Dawkins's 'selfish gene': imagine an amoral virus that picks the brightest ones who'll help it mutate. In the 1930s, for instance, Keynes nudged industrialised nations to accept the heresy that would have given Smith and Ricardo conniptions. He proposed that one of the foundations of free-market capitalism, Say's Law, according to which supply creates its own demand, was wrong. Imagine that you're Mark Zuckerberg in his Harvard dorm room in the 1990s, and you've just created a social network that will, in years to come, have billions of subscribers handing over their hitherto private data to be monetised by Facebook. Here, demand may seem to follow supply.
For Keynesians, the world mostly doesn't work that way, certainly not in the Great Depression era, when demand was so weak that it called out for government stimulus in the form of public works. This was heretical stuff – yet from Roosevelt's New Deal to Attlee's nationalisation of the commanding heights of the post-war British economy, it became orthodoxy. Keynes defibrillated capitalism, bringing it back to life in such a flourishing way in the West as to confirm much of his 1930 crystallomancy. By 1957, prime minister Harold Macmillan could tell Britons that 'you've never had it so good', and not be laughed into opposition. Imagine if Rachel Reeves produced such a soundbite today.
Capitalism boomed during what the French call les trentes glorieuses. Opec's quadrupling of oil prices following the 1973 Yom Kippur War catalysed a stagflationary crisis that, once more, had Marxists drooling at the prospect of capitalism's imminent demise – but something more interesting happened. In 1974, a young pretender to the Tory leadership called Margaret Thatcher met the British-Austrian neoliberal economist Friedrich Hayek, and was beguiled by his ideas that union power should be destroyed and that the state should have negligible economic role.
Once in power in 1979, Thatcher took to handing out copies of Hayek's jeremiad against government, The Road to Serfdom, at cabinet meetings. This revolution spread across the Pond, where US president Ronald Reagan captured its ethos thus: 'The nine most terrifying words in the English language are 'I'm from the government and I'm here to help.'' Capitalism had cheated death once more by mutating into a new identity scarcely recognisable to Keynesians.
It has been doing so for 250 years. Cassidy, a New Yorker staff writer, takes us back to August 1 1771, when inventor Richard Arkwright rented a piece of land in Derbyshire on which he and his partners planned 'to Erect and Build one or more Mill or Mills for Spinning, Winding, or throwing Silk Worsted Linen Cotton oil other Materials'. This, Cassidy tells us, heralded the factory system, which prompted a vertiginous rise in British productivity and trade. On page 15, he reproduces a graph showing global average GDP per capita in international dollars from AD 1 to 2022. It's the shape of a hockey stick: until the end of the 18th century, the line is flat, then it leaps almost vertically.
Those unexcited by phrases such as 'global average GDP per capita' needn't worry. Cassidy is superb at bringing such issues to dramatic life. He offers gripping analyses of socialist communes, slavery, imperialism and monetarism; he takes us to the heart of such topical questions as whether tariffs are folly, as laissez-faire orthodoxy suggests, or essential to making America great again, as Donald Trump insists.
But what struck me most profoundly after reading Cassidy's book is that in 2025 very few of us could imagine a happy future for capitalism like the one Keynes envisaged in 1930. You don't have to be a card-carrying member of the woke Blob to suppose that what economists euphemistically call 'negative externalities', such as our rivers being filled with human waste as water-company executives double their bonus packages, exemplify how something is rotten in the state of capitalism today.
Like Keynes, Cassidy thinks capitalism can be reformed. Tech monopolies can be broken up, child poverty eliminated; even Greta Thunberg's tears over planetary despoliation can be dried. Perhaps if there's a sequel to this 500-page work, he'll tell us quite how all this can be done. On the other hand, before he gets round to writing it, perhaps Trump will unleash a global tariff-based economic doom spiral, and so dig capitalism's grave – just as Marx and Engels dreamed.