Flat White

Coronavirus can’t kill capitalism

23 June 2020

3:08 PM

23 June 2020

3:08 PM

Mahatma Gandhi was once asked by a journalist what he thought of Western civilisation.  He replied, “I think it would be a good idea”.  The same could be asked of capitalism, an elusive creature blamed by many for much. 

In recent times, particularly in current times, there have been many voices raised suggesting that capitalism is the cause of our problems and that capitalism cannot survive without socialism.  And not wanting to waste the crisis, there have been calls to further implement socialism to inoculate society from future economic and social ills. 

What we are witnessing is not a failure of capitalism but rather a failure of government.  After all, it was not the Chinese Capitalist Party that mismanaged the COVID-19 crisis from the beginning.  Capitalism also cannot be blamed for the lack of preparedness amongst many government agencies charged with the responsibility for preparing precisely for events like these we are currently witnessing, and the heavy-handed, ad-hoc interventions undertaken in response.  Nonetheless, it will be the capitalists who will yet again be asked to pay for this failure. 

Writing recently in The Australian, Bob Carr, former foreign minister and the longest-serving premier of NSW posited the question, if capitalism is so good, why does it need socialism to save it every decade?   

Clearing away all the noise and rhetoric, there are essentially only two ways to organise society; through markets and freedom or through command and control.  Capitalism is the political and economic system where a nation’s commerce and interactions are conducted through free and voluntary exchange by private actors.  This contrasts with socialism whereby the means of production are socialised, and societal exchanges are effected by central authorities exercising command, control and force.  Unlike socialism, capitalism as a system requires and embeds freedom at its core in order to allow for risk-taking and human flourishing.  Freedom of trade, freedom of speech, freedom of choice, freedom of expression, freedom of enterprise and freedom of contract are essential. 

Instead of a failure of capitalism, what has been demonstrated is administrative kludgeocractic failure 


Kludgeocracy is a term coined by Professor Steve Teles of Johns Hopkins University.  According to Teles the term kludge “comes out of the world of computer programming, where a kludge is an inelegant patch put in place to solve an unexpected problem and designed to be backward-compatible with the rest of an existing system. When you add up enough kludges, you get a very complicated program that has no clear organizing principle, is exceedingly difficult to understand, and is subject to crashes.”

When applied to government, kludgeocracy results in layer upon layer of short term political and administrative fixes, driven not necessarily from first principles but rather from political expediency.  None of these fixes ever expire and build upon each other into a large, complex, expensive and unmanageable system.  Most concerningly is that, by doing things that government shouldn’t be doing, it reduces the capacity of government to do the things it should be doing. 

COVID-19 has highlighted how far our governments have strayed from their essential purpose.  They have strayed so far from what their responsibilities are that when they are needed, they are not match fit.  This leads to many under thought and anti-liberal policies implemented at breakneck speed.  But worse, because of purpose creep, society’s confidence in the institutions of government are diminished thus further complicating the task of government in emergencies such as those we are currently witnessing. 

It is true that in a fire you do not want to count the cost of water.   But if it is your job to maintain the firefighting equipment, you certainly don’t want to go into a fire with faulty hoses and buckets. 

Consider for example the Commonwealth Department of Health, an organisation the average Australian citizen would assume has planned for a major national epidemic.  Now, while the Department does not operate a single hospital or treat a single patient in Australia, in financial year 2018-2019, the Department received $705 million from Australian taxpayers to fund its operations and to employee near 4,300 staff.  

In its annual report, the Department noted its six “target outcomes”, the fifth being Regulation, Safety and Protection; two spots after Sport and Recreation. 

Of the activities the Department listed under its Regulation, Safety and Protection program is the sub-program Health Protection and Emergency Response where the Department “aims to protect Australia from communicable diseases, natural disasters, terrorism and other incidents that may lead to mass casualties.”  To repeat, “protect Australian from communicable diseases… that may lead to mass casualties”.  

Notwithstanding our current circumstances, in its 2018-2019 annual report, the Department declared that it had “met all performance targets related to this program”.  This included implementing 11 of the 66 recommendations from the 2018 National Action Plan for Health SecurityBut demonstrating its ability to multi-task, the Department did note that a “new Sports Diplomacy 2030 strategy was released in February 2019 in collaboration with the Department of Foreign Affairs and Trade”. 

In the meantime, governments in Singapore, Taiwan and South Korea, for example, devoted resources to planning and stockpiling for a pandemic based on the model of previous disease outbreaks. 

It has never been the case that capitalism has needed salvation by socialism.  On the contrary, it is socialism that needs capitalism to generate the wealth necessary for its survival.  This is evident every time our political representatives refer to the need for a growing economy to fund social programs.  Without capitalism, eventually you do run out of other people’s money. 

In this current miserable time, it is worth reflecting on the words of Winston Churchill who said Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy.  Its inherent virtue is the equal sharing of misery”. 

If the answer is socialism, then the wrong question is being asked. 

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