Will The Real Capitalism Please Stand Up

Monday, 14 April 2014 at 15:23
What some would simply call 'Capitalism', others would call crony-capitalism, state-sponsored capitalism, 'free market' capitalism, or 'really existing capitalism'. Where does this contention come from?

Capitalism is an approach to economics which applies the concepts of private ownership, and private profit through trade to all forms of economic activity which they can be readily applied to. Central characteristics of Capitalism include capital accumulation, private control of the means of production and wage labour. Central to the conceptual basis of Capitalism are the ideas of a competitive market and 'free trade'.

It is those ideas of competitive markets and free trade that are usually the cause of disagreement over what counts as 'Capitalism'. Take for instance the comment:

“How unequally economic opportunity is distributed and how much corporate and government corruption is found in society today, and what great waste and suffering that results in! That's Capitalism for you.”

Some would respond to that with “Well, the problem isn't really with Capitalism, it's the government interfering with and over-regulating the market and getting in bed with big business. So what we have now is crony-capitalism. What we need is more free and competitive markets.”

Others would respond in practically the opposite way “Well the problem is with unchecked free markets and insufficient regulation. What we need is more responsible state management of capital and markets, to ensure more competition and opportunity, and thus a more equitable form of Capitalism.”

To resolve the contradiction it is helpful to be clearer on what a market is and the conditions necessary to sustain one on a large scale. A market is a space which facilitates and aggregates trading activity – the exchange of goods, services and assets. Implicit in this is a transfer of control or ownership between parties in a trade; markets imply private property and the exchange of it.

Once such a space for the exchange of private property is established, an inherent characteristic of markets begins to manifest; the concentration of power and private wealth. This happens through cumulative competitive advantage, where small differences in economic wealth become amplified over multiple trades, leading to ever greater inequality. (While this is more acutely and quickly felt with economic retraction or non-expansion, it remains true even with economic growth.)

Because of this wealth concentrating characteristic, markets present an increasingly unhappy situation for the majority of people influenced by them. Thus for markets to persist they must be protected (from said majority) and regulated to keep general conditions within manageable bounds. Without such protection of property and regulation, markets would simply break down, hence these are necessary conditions for markets to persist. Since a market is fundamental to Capitalism, regulation of markets and protection of property 'rights' are also necessary conditions of Capitalism. It is generally a government that performs that market maintaining role. Indeed some institution with the same sort of powers as government, whatever name it took, would need to exist to perform this essential oversight and protection of markets.

It is easier to maintain a market, and thus Capitalism, in a growing economy, because the growth offsets to a degree, or at least delays the biting point of market led wealth concentration. This is one of the reasons why there is such mainstream focus on keeping the economy growing. How bound to that task a government is, is a simple measure of how aligned they are with Capitalism. In fact, in an economy without extensive growth, Capitalism along with the market would soon fall apart, tending to revert to some form of feudalism from which the modern form evolved, along with more extreme violence.

Following the above through, the very idea of 'free trade' is problematic. At face value it simply means people being at liberty to trade what they want, without coercion. However, as wealth concentrates through cumulative competitive advantage, economic opportunity and thus freedom to trade and bargain shrinks for the majority (as they find themselves between a rock and a hard place) in line with that wealth concentration. Hence, 'free trade' is made a contradiction in terms by fundamental market operations. No imagined 'revolutionary' reset of wealth distribution will change that – so long as the market-economy paradigm remains intact, the same conditions will re-emerge.

This exploration of markets and 'free trade' also explains how markets naturally become less competitive over time (without extra-market disruption or oversight). As power concentrates there is less leverage and opportunity, under standard market operations, for others to compete for that enlarging concentration of economic wealth. Beyond this basic market characteristic, taking the profit incentive (or addiction), it makes perfect sense for concentrated power to lobby for legislation and subsidies which protect and enhance that power and thus the established social order. Where individual financial profit and capital accumulation are the dominant objectives, it makes sense to seek 'free trade' for the self, but much less sense to seek it for others.

Consequently it is simply a logical move to reduce resistance to further profit and power, for government and business to become largely the same thing, at a certain level. Any system predicated on the accumulation of profit, markets and private ownership – that is Capitalism – will arrive at the same logical conclusion, that for concentrated wealth to continue and grow, it must become intertwined with (or otherwise act as) government, either overtly through a State controlled economy, or through networks of lobbyists, friends in high places and preferential treatment of them. Similarly, the use of military force to secure and protect resources, or market friendly conditions, foreign or domestic, can be rationalized as simply taking necessary and reasonable steps to protect business interests, which happily coincide with 'national interests'.

In such an environment vigorous competition may still take place. But for the most part, even where the public/private entwining has not advanced much, this competition happens within economic strata – a few actors at the top heavy distribution and most in the long thin tail – and in the context of as much inequality as the bulk of individuals making up the market can bare. (The possibility to substantially increase individual economic wealth is always there, but is increasingly marginal, in line with inequality of opportunity.) So, even though a sense of dog-eat-dog competition for scraps may be pervasive, in terms of how large concentrations of economic power get used, there is little competition, due to the high concentration of wealth into few hands.

Competition is often mentioned in relation to innovation; finding better and cheaper ways to do and make things to help meet people's needs and desires. However, the kind of environment most conducive to innovation, where people have time and space to develop ideas, explore and experiment with possibilities, and where information is shared freely, is precisely the kind of environment that a market controlled economy tramples on, replacing it with high stress, short-term, threat-focused thinking, and competition for possessions more than between ideas. Therefore, when evaluating innovation, competition and Capitalism together it is important to distinguish the sort of competition that Capitalism engenders.

While the degree and type of competition and how 'free' a market is, may be idealogical facets or aims of a proponent of Capitalism, they are not defining features of Capitalism, there is and can be no particular non-arbitrary qualifying measurement. The extent or lack of economic competition and 'free trade' in a society is simply a measure of how far a market controlled economy has been made to run on, without some intervention to rebalance economic opportunity. To say 'true Capitalism' exists only in some specific and early stage of market economy development is to make Capitalism an arbitrary, perpetually lost fantasy of an aspiration, immune to criticism. If Capitalism is taken as something that can exist, then it must be defined at least by concepts that can evidently be in dominant operation in society - in this case, markets and private property.

In summary, where there is an economy that is predominantly controlled by market forces (exchange and concentration of property), and where private property is protected by some form of government, Capitalism is in effect – however many or few people there are enjoying the benefits of 'free trade'. This is true whatever system of social safety net is in place, so long as that welfare arrangement remains a support system for continued market operation, and does not undermine the narratives (relating to wage labour, wealth creation and the profit incentive) which justify and aid its continuation. It is also true even if the form of government attempts to have a more anarchic than hierarchical flavour.

It follows then that what may pass as Socialism, or socialist policy can itself be a crucial support system for Capitalism, serving to sustain social conditions at a level which allow a market-economy to continue. Social struggle itself can thus serve the same master (even where it also leads to better living conditions) if it operates within its supporting narratives, such 'a fair day's pay for a fair day's labour' (accepting the authority of markets and that people aught to earn to live), and in general where that struggle validates or reinforces social hierarchies.

In conclusion, providing those conditions of a largely market controlled economy are met, there is no crony-capitalism, there is just Capitalism. And corporate capitalism, state controlled capitalism, 'social democratic market-economies', neoliberalism, or somewhat more laissez faire capitalism, are all variations on what is fundamentally the same thing – private profit seeking and capital accumulation through markets.

Disputes over the level of market regulation and property protection (and even what counts as private property), or the tax and welfare system, simply determine the rapacity or stage of power accumulation, and do not fundamentally make a different system, providing an economy (and thus society) remains predominantly controlled by market operations. Having said that, regulation, and social and economic legislation which springs from a different paradigm - one outside of but not immediately contradictory to a market economy - does have the potential to strengthen the support and build the conditions for radical and progressive social change, to a place beyond Capitalism. Two examples of such reforms are:
* Transitioning the tax system away from trade or income tax to an almost wholly property tax based one.
* Introducing an unconditional basic income to more widely spread economic opportunity and thus economic and social participation.

More on markets and progressive economic policies:


Money as Debt http://www.moneyasdebt.net/
Positive Money http://www.positivemoney.org/
Equality Trust http://www.equalitytrust.org.uk/
Basic Income http://www.basicincome.org/

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