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The illusion of permanence

What is the alternative to capitalism?

Over many decades, the Two Cows joke has evolved through various different iterations. The first recorded instances appeared in 1936. Before the internet, people circulated jokes like Two Cows on photocopied sheets. Then they got passed around in email and bulletin boards and mailing lists; then they found their way onto BuzzFeed and Facebook. The joke always starts with “you have two cows” and imagines what would happen to them under various different political and economic systems, including capitalism, communism, state communism, anarchism, and so on. Some versions are incredibly detailed. But they very rarely include two very promising economic practices, the creation of co-operatives, and microfinance.

Interestingly, the latest version of “Two cows”, Modern Capitalism Explained, only presents various different flavours of capitalism. It is as if the other socio-economic systems had simply ceased to exist.

Two Cows, by Marcelo Campi on Flickr

Two Cows, by Marcelo Campi on Flickr [CC_BY_SA 2.0]

The problems with capitalism

One of the problems with capitalism is that investors inject capital into businesses, and then demand a profit. There are a number of issues with this:

  • They have not done any of the work to produce the profit;
  • They can withdraw their investment at any time;
  • They can sell their shares to the highest bidder, thus creating instability in financial markets;
  • They usually have no personal connection or involvement with the company they have invested in;
  • The need to make a profit inflates the cost of goods and services;
  • The creaming-off of profits creates massive economic inequality;
  • The short-termism of demanding a quick return on investment leads to the degradation of the environment, the destruction of habitats, and the over-use of resources.

Capitalism is not small traders who make and sell their own goods, or who buy the produce of others and sell it on. Such merchants existed before capitalism, and they will continue to exist after capitalism has collapsed under its own weight.

So what are the alternatives to capitalism?


One way to remove the problem of investors out to make a quick buck is to use the co-operative model. In this model, the business is co-owned by its employees, though non-employees can often become members. This business model is very popular in Europe, and a number of well-known businesses in the UK (the Co-operative group, John Lewis, and Nationwide) use this model.

The co-operative system means that ownership is spread amongst many people who all own a small share in the business and who receive dividends, rather than amongst a small group of powerful shareholders.


Another useful idea is the practice of micro-finance. This has been very successful in helping to empower women and other small traders in the developing world. It means that people can borrow very small amounts of money that large banks wouldn’t be interested in, and pay them back incrementally without being charged exorbitant levels of interest. I currently have a small amount of money with Kiva, which I have lent out to people in Armenia, Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Kenya, Liberia, Mexico, Nigeria, Pakistan, Peru, and Vietnam.

The illusion of permanence

Those who stand to benefit from capitalism want us to believe that there are no alternatives to capitalism – that because state communism collapsed, and there are very few successful anarchist societies, there is no alternative to capitalism.

This is part of the baneful magic of capitalism; it weaves a fog of confusion and obfuscation around the very tools and concepts that might liberate us from its spell.

That is why we need to liberate ourselves from the illusion of its permanence as soon as possible, and educate ourselves about the alternatives.



  1. Cooperatives and micro-financing are both alternatives to capitalism in certain niches. Thank you for being one of the few who have actually proposed alternative models! Not that the alternatives are not without problems too. One of the issues that cooperatives still face is the ability to raise start-up capital. If you need, say 100 million pounds to build a factory where does that capital come from? It doesn’t come from micro-financing, for certain. Micro-financing is an excellent route for small businessmen, but does have some of the same drawbacks as capitalism (i.e. the expectation of some kind of profit for the investor).

    I do have one thing I would quibble with:

    “They have not done any of the work to produce the profit;”

    I would argue for the small investor, for example one with a retirement fund heavily weighted in the stock market, this is not precisely true. At some point, the small investor worked to make the money he is investing in the first place. The other factor often missed is the risk factor – the capitalist can lose everything, so the expectation of a reward commiserate with the risk is not unreasonable.

    Similarly, the need to make a profit is true not only for capitalists, but for merchants and small traders as well. All other points are spot on.

    One of the issues I see frequently ignored in anti-capitalist arguments is that ownership of shares is divorced from the power to run the company and therefore from the responsibility to do so ethically. To me, this is the main failure of the capitalist system – the shareholders have no real say in how a business is run. Instead, the business is run by overpaid people who often have a poor track record and who are more interested in short term gain no matter what the long term consequences. Corporation owners (i.e. shareholders) need to have more say and also more responsibility) in how the business is run. The Board of Directors model is a joke – the Board is too often merely a mouthpiece for the CEO or the major shareholders.

    Liked by 2 people

      • Looking beyond your list of problems to the ethics of certain un-named capitalists and how there are no checks and balances in the capitalist model is something I have thought about a lot and experienced first-hand. The problem is no longer exploitation or large profits – the problem is the unethical decisions that are often made with no repercussions commiserate with the results.

        Liked by 1 person

  2. There may be other methods for dealing with some of these defects. Capital gains taxes in the ’50s and ’60 were fairly high, which meant that owners had an incentive to reinvest profits in productivity improvements, increasing the value of their company until it was inherited or sold. That also decreased the differential benefit of firing a marginal worker, whose wages appeared as a cost and so were not taxed.

    The change in tax policy pushed in the last two decades of the millennium went hand-in-hand with the rise of the investment advisor. People no longer invested their money with their friends, but trusted “professionals” to place their money for them. Ultimately, this made the investment landscape far more complex, forcing executives to compare their investment plans against the returns from government bonds, for example, which eventually caused companies such as GE to focus almost entirely on leveraging the credit rating to create profits (borrowing money on foreign markets to lend at 4% higher interest to companies buying locomotives and public utilities buying power plants).

    What ensued was basically a confidence game with investments churned solely for the purpose of creating commissions for the fund managers. The joy ride ended in 2008. When I joined my current employer, the 401(k) advisor told me straight out that the market was tapped out at least until 2020, and recommended that I put my money in cash.

    The problem is characterized by economists as a problem of agency: people are paid lucratively for playing with money that isn’t their own. This infects the board room as well, with executives granted stock options that directly dilute existing shareholdings.

    The fundamental proposition of capitalism is that there are two ways to increase productivity: hire more workers, and invest in equipment. The industrial revolution demonstrated the power of the latter approach. With the investment markets in their current state, I think that we’ll see executives and owners returning to those fundamentals.

    Liked by 2 people

    • That’s really interesting. Yes, I think speculating with other people’s money is inherently risky, because people tend not to care as much about someone else’s money as they do about their own.


  3. A couple interesting concepts that provide viable examples of least transitional methods softening of capitalism.
    1. Shared risk between consumers and producers. Community Supported Agriculture (CSA) is an example of this. The buyers into a a CSA pay the farmer (typically organic and always local) for the crop (typically vegetables or fruits) in advance for a share of the crop before the growing season begins. The periodic packages contain the share of that periods harvest. If the crops fail, drought, hail, flood the share is small, if their is a bounty the share is large. The yearly shareholders share the risk with the farmer. Some farms invite or expect the shareholders to provide some labor to the farm or allow for labor in exchange for part or all of the cost of the share.
    2. Local Scrip and moneys – A local currency is issued usable only in the local community. Sometimes it is convertible to the national currency. Such scrip may be based upon barter or other forms of cashless exchange. Such local currency encourages trade to stay within the community, value to be generated locally, and enables disconnection from economics based on debt. The goal is local empowerment. lists some current systems based on local money.

    Liked by 3 people

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