IN his book The Protestant Ethic And the Spirit of Capitalism, the German sociologist Max Weber argued that, despite appearances to the contrary, capitalism was an essentially moral activity that expressed Calvinism's virtues of hard work, saving and the deferment of personal gratification. Investment became a calling.
And it's true that you could see an austere Presbyterian ethic at work in some great 19th-century Scottish thrift institutions such as the Trustee Savings Bank and in the mutual societies. But it has always required a high degree of studied naivety, as well as selective vision, to see some great moral purpose in the ruthless exploitation of human and natural resources that made capitalism what it is today. Though that hasn't stopped people trying.
Even the greatest critic of capitalism, Karl Marx, was in awe of its productive capacity. Observing steam-age industrialisation in the mid-19th century, Marx concluded that capitalism had been a progressive force in society which had destroyed rural idiocy by developing technological civilisation. All that was needed was for the industrial working classes now to take over the means of production and run it in the common interest. Then everyone would be free to "hunt in the morning, fish in the afternoon and be a philosopher in the evening".
But instead, capitalism evolved and gradually made the industrial working class extinct. We now have a higher form of capitalism than Marx could ever have imagined: one global, integrated financial machine, driven by neurotic individualism, managed by computer programmes and beyond the control of any government or social class. Capitalism, in the developed world, gave up making things and turned instead to ever more complex financial engineering to maximise the wealth of an international financial aristocracy with allegiance to no society, faith or moral system. The apotheosis of pure greed.
This is nothing like the clunking capitalism of Marx and Weber and is more like a giant computer game - a financial version of virtual reality world Second Life, where investment bankers trade speculative instruments they don't understand for money that has lost any intrinsic value (except when monetised in their bonuses). Hedge funds, structured investment vehicles, collateralised debt obligations, credit default swaps - all the paraphernalia of the $500 trillion shadow banking system were designed to allow this caste to enrich itself without the rest of us understanding how they were doing it. The trouble was, they didn't understand it either.
So now we're left with a $7 trillion global bail-out of this financial madness, organised by national governments, paid for by us and with no guarantee of success. We have been left like religious devotees, offering ever greater sacrifices to the gods of finance in the hope that they will make all things right again.
But the gods have fled to their palaces of retirement and are damned if they're going to come down to Earth again, until market conditions allow them to make another killing. This is what we must not allow them to do. As we pick around the ruins of financial capitalism, we must finally learn the hard lesson: this system doesn't actually work. It isn't good and it isn't clever.
In previous crises, apologists for the free market could always make excuses, blame others. In the 1970s, it was all down to greedy trades unionists; before that it was the communists and the Soviet Union; before that, nasty foreign governments refusing to recognise the virtues of free trade. But there are no scapegoats left any more. This latest catastrophe is all capitalism's own work. Under Reagan and Thatcher 30 years ago, it finally got its way: the market was opened up and state controls swept away. It didn't work, and now we are heading for global depression.
So what now? Well, some optimists believe that the partial nationalisation of the banks itself represents a form of socialism and that now the state is in charge all will be well. But I fear this is an illusion. What we are seeing is a form of financial corporatism, the merger of the state with the commanding heights of the debt economy. Huge resources are being raised now through our taxes in an attempt to get the moribund system to work again. But the truth is that even if the machine can be restarted, it would only lead to more of the same. We can't go on like this.
The global economy will have to be rebuilt on different principles. Which poses the question: is it possible to create an economic system not driven by personal greed? We are told that it is not; that only by harnessing the profit motive can the economy become productive and human needs be satisfied - only by stuffing the mouths of the rich will the poor be able to eat.
And it has to be said that attempts to run economies in a different way have not exactly inspired confidence. The Soviet Union claimed to be a communist society in which all were equal and in which the profit principle would be replaced by rational economic planning. The ideals were high. But it degenerated into a brutal bureaucracy in which the state enslaved its citizens, claiming it was for their own good.
Human rights were extinguished, intellectual freedom crushed and creativity destroyed. Just handing all economic power to the state is even worse than leaving it with the capitalists. If the future isn't going to be capitalist, it certainly isn't going to be communist either.
So, what else is there? A return to some kind of rural arcadia, perhaps, a post-industrial green paradise where we all grow organic food, cycle to work and stop using fossil fuels. Well, we are certainly going to have to live in a more fuel efficient way and find some means of preventing our economic activity destroying the planet. From an environmental point of view, a global depression may even be seen as a good thing because the collapse of industry and world trade will lead to a lot less greenhouse gas emissions.
But there is a problem here: the population of the world is over six billion and rising, and without fossil fuel-based fertilisers, economic growth and world trade there is no conceivable way that such a population can be sustained. If we had to rely on food grown organically in Britain, our population would have to fall by more than half or else we would have to eat a very great deal less.
So we are condemned to technological civilisation for the time being at least. But what kind of technological civilisation? The financial capitalist model may be broken but it has left us with a pattern of social and economic organisation which will have to be reformed rather than discarded overnight. The principle that has to be salvaged is globalisation, but not as it has been thought of hitherto.
The crisis has had one great benefit: it has forced all the world's governments to recognise that they have a common interest. Moreover, it has shown that the world is capable of mobilising resources on a colossal scale.
TRILLIONS of pounds have been plunged into the western banking system in an aid programme without precedent in human history. In future, when governments bicker about small change while dealing with aid programmes in Africa, or tsunamis in Asia or about saving the rainforests in Brazil, they will have the Great Crash of 2008 thrown in their faces. If it is possible to spend trillions to bail out the banks, then it is possible to do other more worthwhile things as well.
In future, instead of letting the market decide our economic priorities, we are going to have to decide them rationally and then devise market structures to deliver them. This is the kind of purpose-built economic direction that normally functions in wartime, and in periods of national emergency. If this isn't an emergency, I don't know what is.
This is no longer just a good idea but a real economic necessity. The conventional argument that nothing can be done in the world unless financiers can make a lot of money out of it was always morally repugnant, but it is now economically bankrupt also. We can't continue creating ever-greater debt bubbles to deliver ever-larger bonuses for the financial elite. The world economy and the institutions that regulate it will in future have to be reprogrammed to address great global objectives such as tackling climate change, eradicating world poverty and eliminating human misery and ignorance.
The International Monetary Fund, which has seen its job as imposing neoliberal, free market policies around the globe, is going to have to shut up shop or change. After the trillion-dollar bail-out in America, how is the IMF going to continue telling governments in developing countries that they cannot support essential industries, run fiscal deficits or introduce socialised medicine?
The mission statements of institutions such as the World Bank will have to be altered so that they promote worthwhile economic activities and discourage speculative financial capitalism. Their operations could be financed by taxes raised on the trillions of dollars of international transactions that take place on the financial markets. World development goals will have to be exactly that - agreed social and planetary objectives around which national economies will have to be organised.
This may all sound like John Lennon's Imagine. Or one of those anarchist posters from the anti-capitalist demonstrations at the G8 in 2005: "Abolish Capitalism - And Replace It With Something Nicer." But, curiously, it has become the only economically rational thing to do.
If the government's target of 80% reduction in greenhouse gas emissions is to be reached, it will require a lot more than a few home insulation programmes. Renewable energy industries will have to be created, cities will have to be rebuilt, systems of transportation will have to be created. But these are also industries which employ people and in which responsible profits can be made.
Just as governments have had to co-operate to save the banks, so they will now start rebuilding the world economy - rather as Roosevelt did in 1930s America with the New Deal - by mobilising productive activity through public investment. And the great thing is, this needn't mean austerity and rationing. The New Deal set the foundation for the greatest era of prosperity the world has seen: the 1950s. It was based on high taxation on wealth, a mixed economy, state sponsorship of industry and infrastructure investment. The world must now do the same thing on an international scale.
Developing sub-Saharan Africa would bring into the world economy a new source of trade and wealth. Africa has enormous economic potential as a centre for environmentally sustainable agricultural production using abundant solar energy.
Everyone accepts that the age of deregulated capitalism is over; that we must never again allow pure greed to drive the world economy. There is no choice but to start managing capitalism and setting it tasks that are morally and socially sustainable. The age of plutocracy is over. We don't need huge wealth to make an economy work - in fact, we have discovered that the bonus culture is a hugely destructive force. It is a self-serving fallacy that individuals need to be given multi-million-dollar incentives to be productive. A much smaller form of managed capitalism, based around socially responsible enterprise is the way forward.
Who knows, it might even start to fulfil the moral purpose of those secular Protestants whom Max Weber believed created the system in the first place.
