Capitalism is not perfect. But it's better than other systems

Capitalism lacks defenders these days, while protests against it have fresh vigour. A vocal coalition of critics, from Occupy Wall Street to Pope Francis, castigate global trade as being exploitative and people’s fixation on money as the “dung of the devil”.

Worries about the impact of economic inequality on social cohesion lend new urgency to moral questions about markets. But, as John Plender points out in his new book, “Capitalism”, discontents about its effects are as old as the world’s most powerful -ism itself. The pursuit of profit has been “unloved” since Socrates declared that “The more [men] think of making a fortune, the less they think of virtue.” Anti-business sentiment characterises the lampooning of Trimalchio’s feast in Petronius’s “Satyricon”, and persists through Molière’s miserly 17th-century lucre-seekers to the portrayals by Charles Dickens and Emile Zola of dreadful 19th-century bosses and the modern incarnation of greed on the screen, Gordon Gekko in “Wall Street”.

Mr Plender, who once worked for The Economist, is a columnist with the Financial Times. He has written incisively for decades on the excitements, oddities and disasters of financial markets. He approaches the quandaries of capitalism with a shrewd eye for detail. The reader discovers, for example, that Voltaire turned up at the court of Frederick the Great as a pet Enlightenment intellectual, only to run a bond-market scam that could have bankrupted the Prussian exchequer. In the mid-1980s Japanese fund managers visited the shrine of Madame Nui, a restaurateur whose porcelain toad delivered tips on stocks—for a while successfully, acquiring its own portfolio worth $10 billion—until they collapsed when the Japanese bubble burst in 1990. If free markets emerge from this survey as dynamic, their claim to be rational is suspect indeed.

But Mr Plender is wise enough to realise that for all its faults, capitalism has raised the living standards of billions of people since the 18th century and improved their life expectancy. The rapid improvement in the growth rates of China and India in recent decades as they headed (albeit not entirely) in a capitalist direction are further signs of the system’s vitality, as is the contrast between capitalist South Korea and the communist North.

The revival of anti-capitalist rhetoric owes much to the financial crisis of 2008 and its aftermath. The crisis was merely the latest example of the inherent stability of capitalism, a process that, while allowing the economy to benefit from “creative destruction”, causes a lot of collateral damage along the way. The real problem is that capitalism has become associated with high finance, rather than the heroic entrepreneurship of Thomas Edison, whose inventions still surround us. It is not just that few people can see the benefits of complex financial products like credit default swaps. He adds that “bankers have undoubtedly done their best to give capitalism a bad name. The extraordinary scale on which big banks have been rigging interest rates and foreign-exchange markets and ripping off their customers is almost beyond comprehension.”

Mr Plender fears that another great financial crisis is inevitable—international banks are bigger and more interconnected than ever. But he also thinks that the world will muddle through; capitalism will adapt as it has so often in the past. In conclusion, he echoes Churchill’s words on democracy “capitalism is the worst form of economic management, except for all those other forms that have been tried from time to time.”