A page in the history of capitalism is turning – a conversation with Alain Minc

There have been many calls to rethink capitalism since the onset of the pandemic and the economic crisis it brought about. Do you think we are on the verge of a change of our economic model?

The current situation is both very serious, but also in some ways paradoxically more reassuring than the 2008 crisis. In 2008, the capitalist system could have died. Today, this is not an issue: the capitalist system will not die. Economic crises such as the one we are experiencing with covid are not signs of weakness of the capitalist system but, on the contrary, they strengthen it and accelerate major changes and progresses: digital globalisation is increasing, financial globalisation continues unabated with staggering stock market levels. Governments and central banks have also been able to respond better to the challenges they faced.

Nevertheless, a page in the history of capitalism is turning with the economic crisis arising from the pandemic. The extent of the macroeconomic changes that are taking place has not been measured. The coming revolution is both immense and very difficult to conceptualise. If capitalism remains inescapable, ‘the worst economic system except for all the others’, it is important to save it from its old demons. 

Among these ‘old demons’, economic inequalities, which have been reinforced by the crisis, now seem to be at the heart of all challenges.

There is at the heart of capitalism an unbearable paradox: our societies are becoming richer and richer in appearance, but social inequalities only get worse. The dream of the post-war period is becoming more and more distant: we believed in a great policy of redistribution of the benefits of growth, succeeding in reducing economic, educational and cultural inequalities, with the corollary of promoting a huge middle class that would progressively absorb most of the social groups into it. This process of social change worked perfectly from 1945 to the 1980s.

All forms of inequality have increased since then, after the long period during which social democracy shaped Western societies. The market economy produces efficiency and inequality at the same time; when it is running at full speed, with the help of globalisation, it generates maximum efficiency and simultaneously results in maximum inequality. Today, the gains are divided in a leonine way to the benefit of income from capital and at the expense of income from labour. To remedy this, it is necessary either to increase wages or to transform employees into capitalists. The first path is quickly constrained by globalisation and the difficulty for the European economy to maintain a suitable level of competitiveness with the rest of the world. The second path is more promising because it is likely to allow an intelligent distribution of wealth without weighing on business decisions. It is not just a question of modifying the mechanisms of profit-sharing and participation, as the French Pacte bill has attempted to do in a non-coercive way, ie the distribution of profit without changing the structure of ownership, but of allocating shares to employees and making them owners of 10 or 20% of the capital of their employers. 

This would reinforce a specificity of French capitalism resulting from a Gallic desire for an association between capital and labour with the presence of a sometimes-significant employee shareholding. Eiffage, Bouygues, Vinci and Saint-Gobain now have their employees as their main shareholders and the quality of the governance of these companies is not diminished by this, nor is the social climate deteriorated, on the contrary. What is easy to put into practice in listed companies requires some gymnastics in private companies: it is enough to issue shares without voting rights. 

Aren’t these inequalities at least partly the result of a weakening of traditional counterpowers? 

The real problem is that the labour game is unbalanced. Normally the labour game is played between the state, the employers and the trade unions. In a country as unionised as Germany, it is still the trade unions of the old industries (car industry, steel industry) that set the tempo of the split between wages and capital profits in the traditional areas of the economy, with repercussions being felt across all areas of social life. But this match between capital owners and labour force owners for the distribution of the surplus value is becoming more and more unbalanced with the de-unionisation and uberisation of the economy, which undermines the traditional dialectic in labour bargaining.

For this lumpenproletariat – which is only employed in very low-skilled, very low-paid and very unproductive jobs – progress can only come from government decisions. It is then up to the state to take the place of the weakened trade unions, for example, to give basic rights to the drivers and deliverymen of Uber or Deliveroo. We go back to a Bismarckian pattern, in which it was up to the Iron Chancellor to enact the first social rights in Germany. 

This observation is not unique to Europe: globalisation suffers from the lack of trade unions in Shanghai, strikes in São Paulo, social compromises in New Delhi, and trade union activism in Moscow. 

Aren’t these social – and environmental – concerns taken into account by the markets themselves?

Having supplanted managerial capitalism, patrimonial capitalism – a model born of globalisation and the technological revolution – is now being challenged by the rise of a stakeholder capitalism, whose main features are still difficult to define. Two visions are now confronting each other. The traditional one defends the idea that the firm belongs to its shareholders; its vocation and duty is to yield profit on their behalf. The other, which is on the rise, believes that beyond its shareholders, the company must take into account the interests of all its stakeholders – employees, customers, local residents, suppliers and, even more so, the future of humanity itself, by contributing to the fight against global warming. This is a far cry from the traditional social-democratic approach, based on the classic compromise between the three players, employers, trade unions and public authorities.

The two approaches are contradictory: doing good, while achieving the same profitability as in a pure form of capitalism, is a fantasy. Therefore, it is necessary to recognise that the profit objective must be reduced, which has to be honestly conveyed to the market. This is where the problem lies, and Emmanuel Faber understood this the hard way when he was running Danone, promising financial results that did not correspond to the purpose-driven company he had proposed to implement. No company manager can reasonably assume such a choice when doing the biannual road show, where he meets the investors and pension funds of all kinds. Managers first talk about company’s performance in a traditional sense, then engage separately in issues related to the company’s ecological, societal and moral responsibilities, but are careful not to admit that the latter will necessarily weaken the former.

The fact remains that a new philosophy of power, originating in the Anglo-Saxon world, dominates economic life, built on concepts of ‘governance’ and ‘accountability’, for which – an involuntary admission of the difficulty for France to act in this new reality – the French language has not yet found perfect translations. The place of institutional investors in the shareholding of the main French companies nevertheless forces an alignment with Anglo-Saxon governance practices. This phenomenon takes shape in particular through a greater ideologization of economic markets: the state is today far below the level of requirements imposed by the market on companies and their managers. The importance of so-called ‘responsible’ investments bears witness to this, as does the pressure on banks to stop financing certain sectors of activity, such as those linked to fossil fuels or the defence sector. The strong commitment of business leaders to these issues is explained less by the constraints that governments place on their activity than by their concern to improve their relationship with their financial environment, ie their shareholders and bondholders. This is an extremely strong pressure that weighs on company managers today. This ideologization, through which the new impulses that drive Western societies are transferred to companies via the market, is the ultimate burden of the current stage of capitalism, and we are only at the beginning.

Aren’t courts also a profound lever for change? 

The consideration of environmental requirements, compliance with health standards, employee protection, among many other regulatory concerns, has gradually moved from the orbit of the administration to that of the courts. The latter practice the broadest possible interventionism in relation to companies, no doubt because they are convinced of the powerlessness of the state, the inefficiency of the trade unions and an increased power of capitalist actors, which is rarely contested, except by the courts. These same ulterior motives explain why courts resort to the sledgehammer of criminal law, which is more restrictive, more mediatised, and therefore more infamous. Nothing attests in a clearer way to this evolution than the rise of the criminal liability of legal persons: first intended to replace the personal liability of a company’s managers, it ended up instead complementing it, with the company joining its managers in the dock. Judges are often satisfied with the indictment of those who appear to be responsible and are indifferent to the subsequent proceedings: the real sanction, the media pillory, will have been pronounced at this stage.

Examined case by case, civil trial by civil trial, indictment by indictment, judicial intervention may seem fussy, sometimes iniquitous, often uneconomic. Seen from above, from a panoramic approach to the balance of power, it appears more justified, since in the name of the principles of the balance of power, an omnipotent market needs counterbalances, overconfident company directors need a minimum of disquiet, in addition to that imposed by financial markets, and capitalism itself needs regulators. But the fact remains that in a democracy, the overall effectiveness of judicial intervention does not justify individual blunders and procedural excesses.

Isn’t public opinion just as decisive?

Judges can steadily confront markets because their actions are rooted in the movement of public opinion. But we can note again, with, Tocqueville, that public opinion becomes ‘a kind of immense pressure of the mind of all on the intelligence of each’, that ‘faith in common opinion will become a sort of religion, with the majority as its prophet’, or that ‘common opinion is the only guide which private judgment retains amongst a democratic people’.

For more than two centuries, France has lived to the rhythm of a confrontation between the market and the state, as if these two antagonistic forms of organising society and the economy were the only ones that existed. Under the ideological pressure of communism, left-wing myths, the Bonapartist tradition, and the social ambiguities of Gaullism, it was more often than not the state that extended its reach at the expense of the market. With the emergence of patrimonial capitalism, it is the market that has taken historical revenge, forcing the state to retreat everywhere in the face of a new order that is deemed irresistible, irreversible and unsinkable. But new balances of power are now emerging. It is no longer an antagonistic couple, the market and the state, that structures reality, but a new ‘Holy Trinity’ that brings together the market, the law with its high priest, the judge, and public opinion. The Montesquieu triptych – executive, legislative, judicial – has been replaced by another. Public opinion is increasingly asserting itself through NGOs which, thanks to their dynamism and incredible ability to use the fluidity of the Internet to their advantage, are posing as interlocutors for the major capitalist and political players, like general interest lobbies. 

Under these conditions, a new logic is at work: it changes the management criteria of companies; it changes their mode of government; it raises questions about their very nature. We are discovering that a multinational is at least as subject to collective passions as a government. But business leaders are less experienced in this game than politicians and still struggle to play their role in a media society where the democracy of opinion has taken precedence over traditional representation. They will have to learn. The market and opinion are the two masters of contemporary society: should managers forget this, reality will remind them.

In your latest book, you present yourself as ‘the last French Marxist’. Why?

The Marxist heritage is a plural heritage. The Marxism that led to Bolshevism, Leninism and the absolute failure of communism is dead. On the other hand, the Marxist heritage also gave birth to social democracy, a consensual mode of managing class conflicts, of which the ‘whatever it takes’ was undoubtedly the apogee. Beyond that, a synthesis between capitalist dynamics, the weight of history and the functioning of society was achieved. No figure in history has thought simultaneously about history, philosophy, economics, and society. Marx is also the thinker who has best thought about, described, and praised the market economy, its power, progress, the rise of the bourgeoisie, but also the profound movements of society that are undoubtedly linked to it. After decades of success, of which the Scandinavian countries and continental Europe in general were an undisputed example, social democracy got bogged down. It has allowed itself to be dominated by corporatism, which neglects common interest in favour of private interests. It has created huge bureaucratic machineries whose efficiency has proved to be much more rapidly decreasing than the rates of profit, contrary to Marx’s prophecies It has seen whole areas of economic activity escape the reach of trade unions. It has not always turned technological change to its advantage, and, above all, it has not been able to establish itself in the non-Western world. This is undoubtedly the reason why the world economy is out of balance.

In The Communist Manifesto, a supposedly revolutionary book, Marx praises capitalism in the highest possible terms: he shows its virtues in terms of competitiveness, globalisation, and technological progress. He pays tribute to the transformative power that capitalism has given rise to in the bourgeoisie. But he was wrong on two counts. He underestimated the ductility of the capitalist system. If capitalism has a monopolistic propensity, it was also able to correct itself at the beginning of the 20^th century with the dismantling of Standard Oil of New Jersey in 1911, the starting point of anti-monopolistic policies. His second error concerns the tendency of the rate of profit to fall. It was annihilated by technical progress, which allowed for productivity gains: the rate of profit was maintained or even increased during certain periods.

Is this ductility of the capitalist system not undermined by the power of Big Tech? 

The immense contribution of liberalism, which is not sufficiently praised, lies in the inseparable coupling of the market and the rule of law. The market without the rule of law is the capitalist jungle; the rule of law without the market is bureaucratic communism. There is no better illustration of this situation than the regulation of Big Tech companies (Google, Apple, Meta, Amazon, Microsoft) in the contemporary world. Left to their own devices, they represent the ultimate point of the capitalist dynamic praised by Marx. The technological revolution, the expansion of markets worldwide, the creation of de facto monopolies: these are all illustrations of capitalism in action, in its Marxist version: we are now aware of the systemic nature of certain firms. The Big Tech are challenging public authorities in a different way because, in addition to the question of monopoly, they also raise issues related to public freedoms (through the issue of personal data), freedom of expression and freedom of the press, which are new and unprecedented problems.

Hence a cardinal choice. Either the American and European regulatory institutions impose behavioural limits on these behemoths, hypothetical disinvestments, and play the same game on a larger scale than they did in the 1980s in connection with the break-up of ATT, which followed seventy years later the dramatic dismantling of Standard Oil. Or they are incapable of doing so, inhibited by the weight of lobbies, the blackmail of innovation actors, and the intermingling with state powers. We cannot rule out that some of them, such as Google, could be dismantled, and all of them subject to a legal framework akin to the one currently being discussed by the European Parliament, which could be subsequently taken up the the Biden administration if it has a majority in the US Congress.