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Could an almost entirely capitalist country work?

I say "almost" because people are still forced to pay a form of tax, but they don't call it tax - what would normally be government funded services (police, public infrastructure, city beautification, etc) are actually private companies and can get a special license to collect the taxes. So you could have competing police companies, for example. But the payer - while they don't choose the amount they pay from their income - can allocate the funds how they see fit.

Other than that it's a capitalist economy in every way where it's applicable.

The heads of the nation, the "president" type people - the keepers of the constitution - are so ridiculously rich that they are considered unbribeable, and above corruption. But they are, in practical terms, little more than figureheads.

The actual government (like parliament and lower levels) is run by representatives of large companies. This is almost alternative to democracy - it's thought that consumers will "vote with their feet". i.e. stop spending money on the companies that rule badly and so they will lose their place in the government.

Now I'm not asking if this is a good system or even an OK one, it's supposed to be a bit dystopian (for many people anyway). I'm also not asking how "our" (present day) world could become like that.

But is there anything that would make this just undoable?

BTW it's set in "the future" - e.g. flying cars, laser-like weapons, and any advanced technology that can be used to hand-wave limiting-type problems. (e.g. construction being cost-prohibitive, etc.)

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    $\begingroup$ Obligatory reference: memory-alpha.wikia.com/wiki/Rules_of_Acquisition A more serious answer is a question: can capitalism even work in a post-scarcity economy? Currency exists to "fix" the problem of distributing scarce resources and to provide "fair" compensation for effort/work (set in quotes because capitalism has its weaknesses there). But after scarcity ceases to exist, can capitalism even have any kind of relevance?! en.wikipedia.org/wiki/Post-scarcity_economy $\endgroup$
    – MichaelK
    Sep 7, 2016 at 10:38
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    $\begingroup$ I didn't say it was a post-scarcity economy. I didn't mean advanced technology would eliminate scarcity, just that it could be used to get around otherwise prohibitive issues. There'd still be plenty of scarcity... $\endgroup$
    – komodosp
    Sep 7, 2016 at 11:16
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    $\begingroup$ You want Jennifer Government $\endgroup$
    – Separatrix
    Sep 7, 2016 at 13:22
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    $\begingroup$ To add flavor to this "dystopian" statement, consider that such a society would undoubtedly create many monopolies (preventing these is a primary reason the FTC exists in the USA), and I can't help but think that indentured servitude would also come up. After all, if there is no law against it some people would undoubtedly sell their children in such a world in exchange for luxury goods or service... or sell themselves for their family... or maybe that would be a term of non-payment that less scrupulous companies would put in purchase agreements. $\endgroup$
    – GrinningX
    Sep 7, 2016 at 14:41
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    $\begingroup$ @MichaelK Capitalism is no a evil, and is a natural relation without goverment, thus there is no way it can't be removed when goods are ridicusly cheap. $\endgroup$ Oct 30, 2021 at 12:41

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What you're describing, if I'm understanding correctly, is either a Night-Watchman State, or a something of an Anarcho-Capitalist society. I have heard arguments for this sort of government, but my concern is that it would create a highly inequitable and unstable society. Can it be done? The answer of course is yes, but it probably wouldn't last long.

To try and contextualise this, understanding the history of capitalism is essential. Modern conservatives in Britain view pre-Socialist Britain as something of a paradise lost, a view encouraged by former British Prime Minister Margret Thatcher. But it's a gross and erroneous simplification. I will try and keep this brief (and fail).

Edit: I had written this answer a few years ago, and since then have had some more ideas. The most relevant one is that a small state has minimal power to enforce law. In this case, corruption cannot be moderated. The Mafia are an important case study.

The small state is not a hypothetical future without historical precedent. In 1861 Sicily was annexed as part of the unification of Italy.  This led to land reforms, resulting in the privatisation of public and church land, increasing the number of land owners tenfold.  The transition from feudalism to capitalism was problematic, as the new Sicilian state did not have the resources to enforce rule of law.  Having lost their feudal commons, impoverished peasants often resorted to theft.  Coupled with rapid economic development, property owners hired mercenaries to guard property and settle disputes.  These mercenaries became dynastic entities (the first Mafia clans). As far as I know, the only time the Mafia clans in Sicily were subdued, and life returned to a semblance of legal normality, was, rather paradoxically, due to Fascist Italy.

When the Soviet Union imploded the same thing happened: the power vacuum which resulted from the failure of public institutions was filled by gangs and oligarchs. The minimisation of state authority and privatisation of state security creates a new aristocracy of criminal dynasties. A relevant term is "state capture". Without a strong and independent state, and thus rule of law, there is no ability to enforce contract law and thus no financial freedom. Workers will be exploited by those with money because there is nothing to stop this from happening, the "economy" doesn't care about life or justice or efficiency. All that's left is bullying tactics, which work with neither unions nor government strong enough to act (e.g. Ford's anti-union antics)

Ideas about a small state rely upon the assumption that individuals are rational consumers, who obey logical Game Theory principles about decision making. But the vast majority of people are not 'homo economicus'. Human decision making is, neurologically speaking, emotional. Humans with brain injuries to emotional centres also demonstrate a profound inability to make any decisions about anything (See Antonio Damasio's book 'Descartes' Error').

Historical Context

After the Second World War Britain held a general election in 1945, which was won by the then socialist Labour party. They adopted sweeping reforms, such as universal healthcare, unemployment welfare, free education, slum clearance, nationalisation of industry, etc.

These reforms passed because many people were crushed by poverty, due to a lack of opportunity and thus freedom, coupled with the realisation that nationalised schemes could work. After all, if "war communism" could defeat Nazi Germany, surely other collectivist systems could work during peace time?

English industrialist Seebohm Rowntree published 'Poverty, A Study of Town Life' in 1901. This was one of the first major sociological studies, which surveyed over 40,000 people living in York. The conclusions were simple: urban poverty was not limited to London, and most people struggled financially because of reasons outside of their control (sickness, disability, and wages not matching living costs). The study provoked political debate, and challenged the notion that poverty was just due to laziness, leading to reform a few years later.

The Liberal Reforms of 1906-1914 were insufficient. They had been passed to tackle social problems endemic within the classical liberal society of the 1800s. New state-led policies were implemented: state pension, national insurance, and job centres. Before these reforms the elderly, sick, and unemployed had to rely on family and charity, which was not enough.

Poverty was endemic in Britain, even by the start of the war in the late 1930s. There were attempts to help, like Victorian Workhouses, but these were often little better than Debtor Prisons. The gross inequality also led to security concerns, for example Anarchist Terrorism in London, and sympathy for communism.

A frequent Anarcho-Capitalist argument is that a stateless system will balance upon competition between insurance companies, working in the interest of the consumer. Insurers contract security firms to enforce law, which will insure peace and stability... but this is just Sicilian history writ large.

There are many historical examples contrary to the notion that corporations will work for the consumer's interest, like the Pheobus Cartel. This was a conspiracy of lightbulb manufacturers between 1924 and 1939, creating a monopoly which controlled prices and created lightbulbs which would break more often to increase sales. More contemporary scandals of note include the Volkswagen emissions scandal, and the DuPont PFOs pollution scandal, etc.

Without deliberate efforts to mediate between the interests of workers, government, and corporations, inequality will increase. In turn, this will lead to poverty, social unrest, and revolution. That's what happened as a result of the Great Depression in 1929. Germany in particular was vulnerable at this time, owing to its reliance on American investment. Every single German bank failed. With this the entire system, which had seemed so secure in the roaring twenties, was in peril. Street battles between Communists and Fascists led to revolution; the liberal free market system did not survive.

NASA has even done a research paper on the collapse of civilisations, putting inequality high on the list of causes. Concerningly, Thomas Piketty's magnum opus; Capital in the Twenty First Century, finds that after an analysis of capitalism from the birth of the industrialisation to present, there's one obvious rule. Private wealth grows faster than the economy, therefor inequality is natural to capitalism. Without efforts to mitigate this by organisations which have an interest in helping the poor, we are led back to the Great Depression and NASA's paper.

So given these things, it seems likely that a "pure" capitalist society would come into being, become very unequal, and then be overthrown by revolutionaries of some description. It could also tear itself apart as rival insurance and security firms compete for turf, and descend into feudal or criminal mentalities. Mexico's drug war for example.

Conclusion

This is a great idea for a story, because it allows us to explore popular assumptions about politics, economics, and human behaviour. It would also be exciting given the political instability and conspiracies which would undoubtedly emerge, given all the aforementioned examples... from the emergence of the Sicilian mafia, to the anti-union activity of the Ford corporation (and others), to the rise of Russian oligarchs, etc. Unfortunately, the real world may be moving in this direction anyway, given corruption and state capture.

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First, a bit of economic terminology.

'Capitalist' means a system that allows the ownership of the means of production (capital) to be separate from the producers. So one person who owns productive resources (savings, tools, factories, etc.) can trade their use (loan, rent, contract) to another person who uses them to produce stuff for sale. You can borrow money to start a business. You can work in somebody else's factory using somebody else's tools to make goods for sale, that you couldn't afford to do on your own. You both do better by trading than you would do otherwise.

'Free Market' means a system where the price of everything is determined entirely by the law of Supply and Demand. As the price of something rises, the number of people willing and able to buy it at that price drops, and the number of people willing and able to produce it at that price rises. Plot both on a graph, and the point where the two lines cross is called the Market Equilibrium, and is the price at which the amount of goods supplied exactly equals the amount of goods demanded. If the price is set lower, you have more people wanting it than the producers can supply, which results in shortages. If the price is set higher, you have more people trying to sell goods and services than customers are willing to buy, resulting in a glut. Both situations can lead to smuggling, black markets, and criminals feeding off the difference between the price set by law and the equilibrium price, causing huge social problems.

A perfect Free Market optimally allocates resources to production so as to maximally satisfy everybody's needs/desires against the effort needed to deliver it. (Subject to certain technicalities - the First Fundamental Theorem of Welfare Economics. Note - there is a common misunderstanding about the stated need for perfect information. If market information is imperfect, then the optimisation is imperfect too, but still better than any alternative known.)

What I suspect you mean by an 'entirely Capitalist country' is an entirely Free Market one. The trouble is that very often people don't like and don't agree with the prices the market sets - wages are too low, rent is too high, food is too expensive, etc. - and they use the government to force a different price. This results in shortages and gluts (e.g. no rental accomodation, high unemployment) and smuggling/crime (e.g. illegal drugs, alcohol, cigarettes).

Another reason for interfering in prices is Protectionism, where suppliers collude with the government to keep out cheaper competition by raising legal barriers to trade and thus keep prices high. Protectionism can take the form of taxes, tariffs, subsidies, regulations, and in the labour market, trade union closed shops, guilds, and needing guild-controlled certification to work in particular jobs. Nationalism is another reason/excuse for Protectionism - to keep out foreign competition. The consequence of Protectionism is that goods are more expensive for consumers, innovation is stifled, and poorer nations' economies are stifled. It also creates rampant corruption - government-controlled barriers to trade create a market for government officials to bypass the barriers for a fee.

The Free Market view on income inequality is that it reflects a shortage of supply of particular skills. There are more people who want coders than there are people willing/able to code, so the price (wages) for coders is high. There are more people able/willing to flip burgers than society needs, so wages are low. This creates pressure for burger-flippers to learn to code - filling the shortage, and reducing the inequality. Inequality drives changes to the allocation of resources, increasing the supply of things we need and reducing the supply of things we've got enough of. Interfering with those prices removes the pressure, creating permanent shortages, a perpetual need to interfere, and leaving a permanently imbalanced economy.

In a Free Market, the response to some people having extremely high wages is to train more people to do that job. If you think somebody is grossly overpaid, offer to do the same job to the same standard for 10% less. Whoever is employing them is happy to save money, you're happy to be paid more, the wage is forced down, and goods get cheaper. If you can't do that, then there is a barrier to entry that needs to be removed. This can be by better training, or motivating people to switch jobs by other means, or by inventing technology to make the job easier. Again, interfering with price signals removes the incentive to solve the root problem, perpetuating it.

The Free Market ideal is for everyone to be near the minimum wage, but for goods and services to be so incredibly cheap as a result that everybody is still hugely wealthy. Society gets richer not by wages going up, but by prices going down. The ultimate goal it is working towards is for robots to do everything, so nobody earns anything, and for everything to be free.

So finally - what are the problems with a pure Free Market society?

Politics - The public does not understand economics (it's not generally taught in schools), and Protectionism is seductively persuasive to the voters. Politicians who want to get voted in pander to their demands, and indeed, are often personally motivated by corruption to maintain the status quo. Vested interests will fight you if you tried to create a Free Market society.

The disabled and incapable - we don't want people who are disabled (congenital, illness, injury) and unable to work to starve. Health insurance (perhaps paid initially for children by their parents) can deal with some of this problem, as can voluntary charity (so long as it's voluntary, there's nothing uncapitalist about it), but there may still be people who fall through the safety net. A Free Market society would be considerably richer, and so more able to spare more for charity, but it would possibly need to be considered a social duty, so as to avoid the need for compulsion.

Limitations of current education and technology - this is something that a future society with more advanced technology might be able to address. At present, if large numbers of people simply cannot acquire the skills to do a job we need doing, motivating them with money doesn't help. We need more people with maths skills, but lots of people hate maths and are no good at it. You can't turn them into mathematicians by offering them more money. But if we invented educational techniques able to teach people any skill, then this might not be such a problem. Need more CEOs, because they're getting paid too much? Put on the brain hat and train another CEO.

Public goods - these are goods that markets don't work for, so free markets don't either. An example is the music industry. It costs a lot to create a piece of professional music, but is trivial to copy. If a musician tries to recoup their production costs by charging more, they can be undercut. Copyright and Patent laws are Protectionist measures taken to deal with this problem. Other examples are national defence, police, and judiciary. For these, government simply does them itself. I've not seen any convincing Free Market solution to the problem of Public Goods.

If you want to write about a future 'entirely Capitalist' society, I strongly recommend reading Bastiat to understand the economic theory underlying a lot of 'Capitalist' thinking. He does it in a wonderfully readable way.

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    $\begingroup$ Superb answer, welcome again to Worldbuilding, please consider registering so your score accumulates. $\endgroup$ Oct 30, 2021 at 20:42
  • $\begingroup$ "'Free Market' means a system where the price of everything is determined entirely by the law of Supply and Demand." With this definition even comunist is a Free Market, because even when comunist punishes free trade by treat of force they suffer the consequences that the law of Offer and Demand dictates that will happen $\endgroup$ Oct 31, 2021 at 15:50
  • $\begingroup$ "What I suspect you mean by an 'entirely Capitalist country' is an entirely Free Market one. The trouble is that very often people don't like and don't agree with the prices the market sets - wages are too low, rent is too high, food is too expensive, etc. - and they use the government to force a different price. This results in shortages and gluts (e.g. no rental accomodation, high unemployment) and smuggling/crime (e.g. illegal drugs, alcohol, cigarettes).". This is no true, the price is the best if someone is no better than yesterday is because there is no real Free Market. $\endgroup$ Oct 31, 2021 at 16:01
  • $\begingroup$ "The Free Market ideal is for everyone to be near the minimum wage "free market is against minimal wage. Also Free Market does no take position in what is the wage model. And also by stadistical law the market wages will follow a normal distribution. $\endgroup$ Oct 31, 2021 at 16:10
  • $\begingroup$ "The ultimate goal it is working towards is for robots to do everything, so nobody earns anything, and for everything to be free." Actually this of Free Market have nothing, when no body earns nothing and everything is Free you are describing a Imaginary "Comunist" utopia, because there is no market mechanisms. $\endgroup$ Oct 31, 2021 at 16:14
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This isn't just slightly dystopian. It's really, really dystopian. There are a few things I can see happening:

  • For Profit government/private government. Every single service and amenity is charged for. Use a road, pay a toll, to keep the road intact and to make a profit besides. Call the cops, pay a fee. Certain neighborhoods would collectively make a general fund so that cops would come no matter what. I see that people have already linked the Ferengi rules of acquisition in the comments. If you actually look at the DS9 episodes where they are on Ferenginar, you'll notice that every single service (including, if I recall correctly, the use of the elevator in a government building) involved a fee of some kind.

  • Massive Pollution Profit is the most important thing. In a purely or nearly purely capitalist society, there would not be an EPA. Consider leaded gasoline for instance. The manufacturers knew how dangerous it was, yet, because there was a profit, they produced it for as long as possible before they were brought to heel. Champions of capitalism say that the market self-regulates this sort of thing, and that by harming folk you would lose customers. Yes, eventually, you do lose customers, but in the meantime, you take home a tidy profit. So what if your company tanks or doesn't deliver on its promises or kills some folks--individuals will make $$. This happens now, and has happened in the past. In a purer form of capitalism, you can bet it will happen with far more regularity.

  • Monopolies & Price Fixing This is the end game of Capitalism. There's a reason why we have laws to try and prevent it. We still don't, because with enough money, lobbyists influence those laws.

  • Disadvantaged Workers & Perhaps a revolution Take a look at inappropriateCode's answer.

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  • $\begingroup$ And yet every problem listed here was worse in the very anti-capitalistic Soviet Union. Methinks capitalism is being blamed for activities that represent its antithesis. Again. $\endgroup$
    – EvilSnack
    Sep 11, 2016 at 17:57
  • $\begingroup$ @EvilSnack Strangely enough, the extreme of nearly any system ends up in this state. We do not live and have never lived in an entirely Capitalistic society. $\endgroup$ Sep 11, 2016 at 19:30
  • $\begingroup$ - "For Profit government/private government. Every single service and amenity is charged for. Use a road, pay a toll, to keep the road intact and to make a profit [...]" This cannot happen if the goverment does no own the roads, etc. but even if the goverment owns certain propeties like courts or police, just put a article in the constitution that the goverment can't force monopilies and this implies that the goverment can't make profit charges because it would convert it to a profit activity thus making it a goverment enforced monopoly. $\endgroup$ Oct 31, 2021 at 16:24
  • $\begingroup$ - "Massive Pollution Profit is the most important thing. In a purely or nearly purely capitalist society, there would not be an EPA. [...]", this is complety false, if the society if the justice system is correctly designed, probably like as proposed in the book [To serve and protect][2], insurance will persue to averyone what cause harm to the life, health liberty or private property of other, and this includes problems like polution. $\endgroup$ Oct 31, 2021 at 16:24
  • $\begingroup$ - "Monopolies & Price Fixing This is the end game of Capitalism. [...]", complety false, monopolies and oligopolies no can't rise without goverment assistence. $\endgroup$ Oct 31, 2021 at 16:25
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Is almost perfectly doable

The heads of the nation, the "president" type people - the keepers of the constitution - are so ridiculously rich that they are considered unbribeable, and above corruption. But they are, in practical terms, little more than figureheads.

Surely possible.

The actual government (like parliament and lower levels) is run by representatives of large companies. This is almost alternative to democracy - it's thought that consumers will "vote with their feet". i.e. stop spending money on the companies that rule badly and so they will lose their place in the government.

Possible as long insurance companies are no involved in any conspiration oor contitution infrigment, and they can act properly to avoid any conspiration or constitution ingfrigment. I would recommend better to use a more democratic no monetary approach and instead just require to the senators, etc. to be just finacially auto sufficient (and no being involved in big buisness). Also forbid donations to political parties.

Now I'm not asking if this is a good system or even an OK one, it's supposed to be a bit dystopian (for many people anyway). I'm also not asking how "our" (present day) world could become like that.

Are you joking?. This is nearly perfect.

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  • $\begingroup$ Suggestion: when both Milton Friedman and Keynes think the Austrian School is full of it, I wouldn't hold it as an example. $\endgroup$ Nov 1, 2021 at 20:17

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