A Point Of View: Why capitalism hasn't triumphed

Capitalism may seem like "survival of the fittest", but it could be halted or reversed by politics or the random flux of human events, says John Gray.

In boardrooms, banks and governments the belief has taken root that the advance of capitalism is irreversible. The market-based system that developed in the West has spread to nearly every country in the world. Central economic planning of the sort that existed in the former Soviet Union and Mao's China no longer exists as a separate economic system. An outpost may linger on in North Korea, but there is really only one kind of economy left in the world.

Faced with the near-universal triumph of market forces, many have concluded that capitalism has won out in a process of evolution like that which occurs among species. Intensely innovative and enormously productive, capitalism seems to have driven every other type of economy to extinction. Evolutionary ideas are pervasive at the present time, and it seems natural to extend them beyond the domain in which they were first applied. But it's far from clear that any kind of evolutionary process is at work in society. In the past, influential thinkers have believed a number of quite different economic systems would win out in what they imagined was a social version of Darwinian evolution. In every case so far, history has falsified these expectations. There's no reason to think the situation is different today. The seemingly unstoppable advance of market forces could easily be halted or reversed by political decisions and the random flux of human events.

The notion that societies and economies evolve isn't new. A version of the idea was presented by Herbert Spencer, a Victorian prophet of the unfettered free market who is now largely forgotten but whose far-fetched ideas somehow keep re-emerging. It was Spencer and not Charles Darwin who invented the much-misused expression "survival of the fittest". Spencer believed that different types of society competed with one another as species do in the natural world, and suggested that two types of society, which he called "militant" and "industrial", were competing in his own day. In militant societies economic life was based on coercion and directed in one way or another by government, while in industrial societies the economy was based on contract and voluntary exchange. The monarchies and empires of continental Europe illustrated the militant type, while laissez-faire England in the mid-19th Century exemplified the industrial mode. Industrial societies were essentially peaceful, Spencer believed, while militant societies were prone to war.

Throughout most of his long life - born in 1820, he died in 1903 - Spencer was sure which of the two types of society would prevail. The end-result of social evolution could only be that capitalism would spread everywhere. It was only towards the end of the 19th Century, with the rise of Bismarck in Germany and the outbreak of the Boer War, that Spencer began to suspect that militant societies might get the upper hand. Baffled by the course of events, he spent his last years in a state of deep gloom.

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But the idea that societies evolve didn't disappear. Instead, Spencer's disciple, Beatrice Webb - the sociologist and co-founder of the London School of Economics - came up with a new direction for social evolution, the opposite of that envisioned by her mentor. Having observed the scale of poverty in London, Beatrice abandoned belief in laissez-faire and converted to socialism, but she continued to believe that society was evolving - towards central planning. Along with her husband Sidney, she became an ardent admirer of Stalin's Russia and together they produced a book, The Soviet Union: A New Civilization. In the first edition in 1935, the title included a question mark after "Civilization". But Sidney and Beatrice were so sure in their minds about the direction of social evolution that they went on to remove the question mark, which doesn't appear in later editions of the book.

Unlike Spencer, the Webbs had the good fortune to die - Beatrice in 1943, Sidney in 1947 - with their illusions still intact. The new civilisation they were confidently expecting never appeared, the Soviet Union collapsed and Russia today is unlike anything they could have imagined. But the idea of social evolution still hasn't gone away, and in some quarters it's as strong as ever. In the 1980s, the Nobel Prize winning Austrian economist FA Hayek presented an evolutionary theory similar to Herbert Spencer's when he suggested that capitalism would prevail because its immense productivity could support a larger human population than any alternative economic system.

Echoing these ideas, many in the West interpreted the Soviet collapse as showing that central planning had lost out in a Darwinian competition with free markets, and many today think China couldn't possibly reverse the move to capitalism that has taken place in the country in recent decades. But the Soviet Union didn't disappear in 1991 because central planning was inefficient and corrupt - that had been the case ever since the Soviet system was founded in 1922 in the wake of the Bolshevik Revolution of 1917.

The collapse occurred because the USSR was defeated in Afghanistan and couldn't control the forces of religion and nationalism that had erupted in Poland and the Baltic states. Similarly, it wasn't through any process of social evolution that capitalism was embraced in China. The Chinese experiment was launched over 30 years ago as a result of decisions made by Deng Xiaoping, and could well be halted by the decisions of later leaders.

In fact there's nothing Darwinian about the idea of social evolution. The key feature of Darwin's theory is that evolution has no overall direction. As he put it in his Autobiography, there is no more design in natural selection than there is in "the course in which the wind blows". The evolution of species occurs as part of a process of drift, and the same would be true of societies if they also evolved. Evolution isn't going anywhere in particular, and all talk of societies evolving towards some common end-point - whether capitalism, communism or anything else - involves a basic misunderstanding of Darwinian evolution.

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Social evolution is just a modern myth. No scientific theory exists about how the process is supposed to work. There's been much empty chatter about memes - units of information or meaning that supposedly compete with one another in society. But there's no mechanism for the selection of human concepts similar to that which Darwin believed operated among species and which later scientists showed at work among genes. Bad ideas like racism seem to hang around forever, while the silly idea of social evolution has shown an awesome power to mutate and survive.

Over the next few years, the belief that societies everywhere are evolving in the direction of market capitalism could be sorely tested. We've seen in Russia how the spread of global market forces can be reversed by a determined and apparently highly popular leader. Putin's Russia hasn't reverted to central planning, but it's turning within itself and trying to reduce its dependency on world markets. Something similar could well occur in China. Throughout China's economic experiment, the state has never surrendered its control of the commanding heights of the economy. It's not hard to imagine the powerful new president Xi Jinping reacting to the threat of unrest in the current economic slowdown by strengthening government control throughout society.

Capitalism has survived the financial crisis that began in 2007, and there's no reason to think it faces any imminent prospect of global collapse. Equally, there's no reason to suppose capitalism is going to resume its advance. To my mind the most likely upshot is that the future will be like the past, with the world containing a variety of economic systems. Whatever happens, it won't be determined by some imaginary process of social evolution. It will be human decisions, interacting with the uncontrollable flow of events, which lead the world into an unknown future.

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