Charles Darwin wrote of “Nature red in tooth and claw”. If he were to survey today’s global economic carnage, somewhere at the back of his mind would be the satisfied thought: this is the way I said things were. Two hundred years after his birth, the ruthlessness of natural selection has become the driving force of wealth-making among humans as well. Or so it seems.
There has long been an instinct to draw parallels with the way evolution moves forward on organic corpses and the manner in which a competitive marketplace deals with people. Friedrich Engels was much taken with this: one reason crude Darwinism diffuses the third volume of Das Kapital. The philosopher tried to fuse Marxism and On the Origin of Species in a fortunately forgotten work: The Part Played by Labour in the Transition from Ape to Man.
Better minds have done a better job of noting how economic and biological evolution require many corporations and animals to die. “The precise mathematical relationship which describes the link between the frequency and size of the extinction of the companies…is identical to that which describes the extinction of biological species in the fossil record,” pointed out Paul Ormerod in Why Most Things Fail. “Only the timescales differ.”
Darwin’s theory did help break the mental mould in economic theory. Classical economists like Adam Smith — whom Darwin read avidly — sought to find universal, timeless laws. The economist Alfred Marshall, inspired by Darwin, argued economies were dynamic and an understanding of individual motivations was needed. “The main concern of economics is thus with human beings who are impelled, for good and evil, to change and progress,” he said, paving the way for microeconomics.
It is easy to cast the present economic crisis in a Darwinian light. First, treat corporations and governments as organisms competing in the natural environment of the market. Second, see environmental change in the way, over the past decade, sophisticated financial risk instruments and an unprecedented wave of cheap capital had changed the global economy. Subprime loans and the like were born of this unholy marriage. In Darwinese, the environment has changed radically. And right now natural selection is taking place with the market (and official bail-outs) determining which firm, and even the odd government, survives the shakeout.
But Darwinism is more than just natural selection and adaptation. These were views that existed before him. What was striking about Darwin was his argument that evolution was blind and random, a matter of being under the wrong meteorite or next to the wrong sabre-tooth tiger at the wrong time. It did not necessarily lead to progress and there was definitely nothing planned about it. Galapagos Island finches sought only to survive — not to create superior finches.
Human economic activity, on the other hand, is expected to generate wealth and make people more prosperous. This, in turn, is because, unlike animals being herded by the forces of evolution, humans have more control of their environment and try to put a rational thrust behind their actions. Darwin — reluctantly — accepted that humans were evolving at a psycho-social level different from other organisms.
Those who rage against capitalism argue that market economics hasn’t actually helped people, that it is inimical to progress. They lie. Other than a few nations floating on oil and populated with idle rich, all the wealthy nations of the world have got to the top of the greasy pole by accepting that greasy poles make economic sense. Almost all the poverty reduction of the past 20 years — and it has been unprecedented — has been because China and India began to rediscover the market.
In contrast, Darwin saw evolution as a blind process bereft of anything uplifting. It didn’t necessarily produce better life-forms. It produced survivors and even then for only limited periods of time. A competitive economy with many independent players does a remarkably good job of producing superior economic entities. The most obvious example being the private corporation. But it also applies to governments. The modern firm as we know it came into existence between 1880 and 1910. It then exploded, spreading and multiplying across the world at a remarkable speed. Ormerod compares it to the so-called ‘Cambrian explosion’, biologist Stephen Jay Gould’s term for the enormous surge in new life-forms that occurred 550 million years ago.
The churn is remarkable. Even the largest firms are born, and die, at a rapid pace. The present economic crisis is the equivalent of a climate shift. One obvious result, for example, will be a radical rehaul of the financial sector. There will be other changes for the better and, eventually, the world economy will revive on a more even keel. Darwin would say it is the survival of the fittest and broadly agree with anti-globalisation protestors that the aftermath is no improvement. They would be wrong. And this reflects one of the weaknesses Darwinism faces when applied to modern society.
What is remarkable is that 200 years on, the power of his ideas is such that they are still 80 per cent useful in describing a circumstance he would never have dreamt of.