Last week saw the 200th anniversary of the birth date of the celebrated, and equally controversial, zoologist Charles Darwin. Darwin’s theories, now generally termed ‘evolution’, gave light to the process of natural selection that lies behind the constantly adapting face of life on earth. After its discovery, natural selection grew progressively more widely accepted, even by some creationists, and, as a model, began to be used as an analytical device.
Sociologists, like Herbert Spencer who on reading ‘On the Origin of Species’ first coined the phrase ‘survival of the fittest’, have applied the theory of natural selection to human society in the way that Darwin had applied it to the human organism, arguing that systems of society evolve in a similar way to DNA. And, in turn, it has been argued that Darwinism is equally applicable to businesses and economies.
Natural selection works on the basis that DNA, when replicating itself, occasionally experiences anomalies and, as a result, mutates, producing something new and different. This slightly dissimilar organism must then face the testing ground of life to see whether or not it is viable, overcoming threats and sustaining itself long enough to reproduce. Thus it is the case that only those genes capable of survival in the current environment are transmitted from one generation to the next.
In many ways the theory underlying the free market economy works in the same way, but for organisms read firms and in place of survival the battle is for long term profitability. Businesses must continuously adapt to changing consumer demands and capricious fashions with the use of marketing and market research or face becoming outmoded. The recent unfortunate case of Woolworths proves how the market conducts its mandate for change ruthlessly and unsentimentally.
To continue the analogy, seemingly insurmountable corporate monoliths like Tesco and Walmart are evidence of a gene (the supermarket) becoming overwhelmingly dominant in the economic environment. In this way, they could be compared, albeit entertainingly, to something like the dinosaurs during the Mesozoic era or mammals in the present Holocene; Tesco is Tyrannosaurus Rex. This analogy operates both in the way in which monopolies constitute the largest corporate organisms in the market but also in the way in which they suppress the wider gene pool leading to a narrowing in the variety of life; a period of homogeny.
In economics, Marx observed distributive inefficiencies in the market, arguing that the process was not sustainable and that the constant upward movement of capital, as can be seen with examples like Tesco, would eventually dismantle the world economy. And this, as has been seen, occurs cyclically: In nature when a certain species reaches critical mass, the point at which its environment can no longer sustain its size, it is always the case that the species begins to go into decline and this will, in time, be true of the supermarket monopolies. At length, unsustainable size, diminishing returns and pressure from new business models will displace the supermarket, making it obsolete.
And classical economists were perfectly happy to let the market run its course in this way. However, ethical concerns about the market raised by socialist and neo-liberal thinkers have led, over time, to a shift away from this classical view of the Darwinian market. Post-enlightenment, conservative political values began to be replaced with concepts like social justice and positive freedom which economists like Keynes observed that the market did not provide naturally and, in the pursuit of humanitarianism, necessitated the harnessing of the once wild market.
There also exists the constant threat of the crash or exogenous shock, the economic equivalent of natural science’s extinction event, when many firms are simultaneously devoured by random forces or forces external to the market. And thus, with people’s growing dependency on the economy and the increasing contingency of worldwide finances, it became essential to assume control over the economy in the same way a doctor would intervene in order to save a person’s life.
This line of thought is realised in the conception of the fiscal state; the public sector and the welfare system; the state taking control over the vagaries of the market, and has been witnessed most recently in the way the government saw the need for the British financial sector to be bailed-out in order to protect the savings of consumers. This highlights a distinction between the once feral, Darwinian economic model and the modern, ethical approach of macroeconomic management.