Capitalism is sustainable throughout the economy

Nearly 250 years ago, the economist and philosopher Adam Smith wrote The Wealth of Nations, in which he described the birth of a new form of human activity: industrial capitalism. It would lead to the accumulation of wealth beyond anything that he and his contemporaries could have imagined. Capitalism has fuelled the industrial, technological and green revolutions, reshaped the natural world and transformed the role of the state in relation to society. It has lifted innumerable people out of poverty over the last two centuries, significantly increased standards of living, and resulted in innovations that have radically improved human well-being, as well as making it possible to go to the Moon and read this article on the internet. However, the story is not universally positive. In recent years, capitalism's shortcomings have become ever-more apparent. Prioritising short-term profits for individuals has sometimes meant that the long-term well-being of society and the environment has lost out – especially as the world has faced the Covid-19 pandemic and climate change. And as political unrest and polarisation around the world have shown, there are growing signs of discontent with the status quo. In one 2020 survey by the marketing and public relations firm Edelman, 57% of people worldwide said that "capitalism as it exists today does more harm than good in the world". Indeed, if you judge by measures such as inequality and environmental damage, "the performance of Western capitalism in recent decades has been deeply problematic", the economists Michael Jacobs and Mariana Mazzucato wrote recently in the book Rethinking Capitalism. However, that does not mean there are no solutions. "Western capitalism is not irretrievably bound to fail; but it does need to be rethought," argue Jacobs and Mazzucato. So, will capitalism as we know it continue in its current form – or might it have another future ahead? Capitalism has spawned thousands of books and millions of words, and so it would be impossible to explore all its facets. That said, we can start to understand where capitalism could be headed in the future by exploring where it began. This tells us that capitalism hasn't always worked the way it does today – particularly in the West. Between the 9th and 15th Centuries, autocratic monarchies and ecclesiastical hierarchies dominated Western society. These systems began to fall away as people increasingly asserted their right to individual liberty. This push for a greater focus on the individual favoured capitalism as an economic system because of the flexibility it allowed for private property rights, personal choice, entrepreneurship and innovation. It also favoured democracy as a governing system for its focus on individual political freedom. The shift toward greater individual liberty changed the social contract. Previously, many resources were provided by those in power (land, food and protection) in exchange for significant contributions from citizens (for instance, from slave labour to hard labour with little pay, high taxes and unquestioning loyalty). With capitalism, people expected less from governing authorities, in exchange for greater civil liberties, including individual, political and economic freedom. But capitalism would evolve significantly over the following centuries – and particularly so during the second half of the 20th Century. After World War Two, the Mont Pelerin Society, an economic policy think tank, was founded with the goal of addressing the challenges confronting the West. Its specific focus was on defending the political values of an open society, rule of law, freedom of expression and free market economic policies – central tenents of classical liberalism. Its ideas eventually gave rise to "supply-side economics". This was the belief that lower taxes and minimal regulation of the free market would lead to the most economic growth – and, therefore, better lives for all. In the 1980s, coupled with the emergence of political neoliberalism, supply-side economics became a priority for the US and many European governments. This newer strain of capitalism has led to increased economic growth worldwide, while lifting a substantive number of people out of absolute poverty.