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Problems of Capitalism: Power Accumulation

Capitalism has a lot of problems, a lot of ways it can go wrong. But power accumulation is baked in. Capitalism is the centralization of capital in a few private hands. This is justified in the ideological literature (mostly economics), because it allows for scale, and thus economies of scale, and allows for development. If capital doesn’t accumulate in a few hands it is hard to build factories, huge mines, and so on. (This is the theory, there are obviously other ways to do large scale tasks.)

Now, power accumulation is a problem in all systems. You need some to get things done, but doing too much always leads to dysfunction.

In capitalism, money controls capital (labor, land, resources, etc.). That’s what makes it different from communism, feudalism, despotism, or centralized monarchy. This is so true that the pre-conditions for capitalism include being able to buy labor and land and resources with money. This is because in, say, feudalism, you can’t — in feudalism, people mostly aren’t for hire, land is controlled by nobility and clergy, and free farmers who don’t (and in many cases can’t) sell much.

Money, in a capitalist system, is power. Power is the ability to decide what other people do. At the lowest level, this is known as demand. If you buy a chicken, it sends a signal to someone to keep producing chickens. If more chickens are bought, it says “breed more chickens.” If you’re an ordinary individual, you have this power only in aggregate.

The more money you have, the more demand you control, but you also gain the ability to not just signal; you can rent people to work for you, and they’ll do what you say.

At a certain point, you gain political power because you can hire people to influence politicians, or give them things they want, or help them get elected, and pretty soon they tend to do what you want.

The problem is that capitalism is a money accumulation system. Unless the tendency is carefully checked, money flows to the top, and so does power. Whatever secondary system is in control, be it representational democracy or the CCP, they stop making decisions based on democratic or party principles and start making them based on money.

But capitalism, to the extent it works, works because of good price signaling and semi-competitive markets. For markets to deliver, no one must have market power except a government which is acting out of motives other than profit motives.

Competitive markets are dynamic: it’s hard to keep your money over the long term, let alone for you children and grandchildren, who did nothing to deserve it, to keep it.

So capitalists on winning want to change the rules so that markets aren’t competitive.

They also want to expand capitalism into areas it should not control: roughly anything that is a natural monopoly (all of which should be run by government) or a fundamental welfare service (health, education, etc…) or which runs better when vastly dispersed.

So capitalism becomes a cancer: not only does it grow further than it should, it destroys the proper functioning of markets and of anything else it takes over which should never be part of capitalism.

The further effect is a fairly simple mechanical one: the more money is concentrated, the weaker is demand for non-luxury, non-investment goods. Back in the 2010s people were crowing about how low inflation was, but it wasn’t: the price of arts, collectibles, yachts, real-estate and so on soared: all the things rich people want. This causes general demand collapses which lead to recessions and eventually depressions.

They also distort price signals so that what the majority of the population wants and needs is under-produced and what the elites want are over-produced.

So the general rule for capitalism is that the rich have to be kept poor, which is a specific instance of the general rule across all society types that the powerful must be kept weak if the people are to prosper.

JFK was the first post-war break: he dropped high marginal tax rates significantly. Estate, income and capital gains taxes all need to be quite high on those with the most.

As for oganizations, the corporate socialists are more or less correct. We organized control in the wrong ways: large businesses must be controlled either by their employees or by their customers, or perhaps both, with the community  also having some control and a veto over destructive actions. Small business are fine in the control of a single person, large ones are not. We’ve proved that over and over again.

Every good thing about capitalism is based on keeping markets relatively competitive and keeping capitalism out of the parts of the economy it shouldn’t control (about 60% of it.) And doing that means keeping the rich poor and weak.

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Capitalism’s “Invisible Hand” Is Prescriptive More Than Descriptive

The invisible hand is the idea that people operating based on their own self interest in a market economy will optimize “value” and by doing so will increase human welfare. If a person runs a company which makes something that people are willing to buy, they must want or need that thing, and the person will want to make more of that thing so that they can become richer. They do it out of greed, but the richer they get the more they improve the common weal, as it were.

So even though they aren’t doing what they do because they care about the welfare of others (Adam Smith is very clear about that) operating from greed leads to increase human welfare.

Works, except when it doesn’t.

Descriptive statements describe how the world objectively is. Prescriptive statements describe how the world ought to be.

It is certainly possible for someone to get rich doing good. It is also possible for them to get rich doing evil, and it is quite common for them to get rich doing both good and evil things.

Oil companies produces something people want. Oil, natural gas and coal have lead to a large chunk of the world being much better off. But the oil companies knew about climate change and not just suppressed the information, they funded denialism, for the obvious reason that they would make a lot less money if there was a political consensus that less oil and gas and coal had to be used.

Every company wants cheap labor, to reduce their costs, but wants consumers to buy their goods. This led to the Great Depression, in effect (the story is a bit more complicated but this is the essence), and was only fixed when the government forced them to give good wages to employees, and provided price and wage supports along with social security and medicare for old people who couldn’t work, but could continue consuming.

All companies who provide necessities, things people must have, have the ability is they are a monopoly or an oligopoly acting in a collusive matter (which doesn’t require meeting) to raise prices much higher than is good for human welfare. This includes food, water, housing and medical services, among others.

Many companies produce what economists call negative externalities: they do something which hurts other people, but don’t pay the cost. Right now in Britain, privatized water and sewage companies are paying record dividends while dumping record amounts of waste into Britain’s waterways.

Walmart and Amazon both tell their workers how to apply for food stamps and other benefits: they take the profits from cheap labor and dump much of the costs onto the government.

Positive externalities are as big a problem: you do something good and someone else gets the profits, so you have trouble doing more good or even continuing to do good. I like to use the example of the British Museum: without them many people wouldn’t come to London or stay as long, but almost all of the money is spent in hotels and restaurants and the British Museum gets almost none of it, even when you consider the government funding based on taxes it receives.

Universities are another classic: they produce a great deal of value, but are able to capture almost none of it. A good government keeps them well funded and emphasizes teaching and research not administration because they know that universities create value the government will eventually capture.

In dozens of ways markets actually incentivize acting in ways that don’t lead to human welfare, but they can improve human welfare. That’s the issue. It isn’t automatic. Sometimes it works that way, sometimes it’s nothing but oligopolies grasping an excess share and companies dumping their costs on society while taking the profits.

So the invisible hand making greed work to the benefit of all is prescriptive: it is a way that an economy with markets can work, not a way that it must work. If you want the invisible hand to do what Smith said it would, you have to stay right on top of capitalists and make sure that the can only get rich if they increase human welfare.

To a large extent, in the New Deal and post-war American period, that’s what government did. Once Reagan took over, it didn’t, it did the opposite because a rich middle class with a lot of money was like sheep in full coat waiting to be sheered for wool, then eaten.

Most economic issues are politics in drag and the vast majority of politics is just about power and coalitions. The remaining economic issues are about natural laws: ecology, geology, physics, biology: mother nature bats last and she doesn’t give a damn what happens to stupid humans or any other species.

All economic systems are prescriptive. “This is how the economy should work” and are descriptive in the sense that if the economy is organized according to the prescription, it is expected to produce certain results.

Capitalism can, for certain periods and places, produce increased human welfare. But it’s not automatic, it requires keeping capitalists under firm control. Capitalists, as it were, make fine servants, and terrible masters.

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The Essence of Capitalism

Eric Anderson wrote an excellent post on how late-stage capitalism engenders mental illness. I thought I’d follow it up with a simple post on capitalism.

As the name implies, capitalism is the accumulation of capital. This doesn’t mean money, primarily, that’s not what the early theorists meant by capital: they meant the means of production: land, workers, resources and capital goods: machinery in particular.

Capital is the ability to make and grow items. Because of economy of scale, if you concentrate capital it is easy to increase how much you make: Adam Smith’s famous pin factory.

But to concentrate capital you have to take it from a large number of people and put it in the hands of the few. This has been covered by a number of authors, and it involves taking away the commons rights of people in Europe (their right to use the land, which had existed for about a thousand years or so). We demonize serfs and peasants, and they had to engage in demeaning acts of servility, but they had strictly defined obligations to their lords for a certain amount of work, crops and animals and once that was taken care of they were able to spend their time as they pleased and they could grow crops on land they had right to; pasture their animals and so on.

Economists call the concentration of capital “primitive accumulation” but what it was was taking away property rights from people so they couldn’t support themselves. This forced them to go to cities and work in factories and so on, where they lived shorter lives, worked a hell of a lot harder (6 1/2 12 hour days were pretty common) and were sick a lot more often. The freedom of capitalism is the right to sell your labor, not the right to control how you spend your day. Unlike serfs and peasants, who were tied to the land, you could choose your master, but for most of the population, that’s what it was, a choice of masters, at least when there weren’t enough workers.

In the rest of the world European capitalism was about conquering land and into the 19th century, about taking slaves. The only thing better than workers who are desperate being workers who you didn’t even have to pay.

Capitalism, again, is about concentrating the means of production, capital, in the hands of the few. It is justified by the idea that concentrated capital is more effecient and therefore everyone has more. There’s a lot of arguments about whether that’s true and we now know, for example, that land clearances didn’t increase agricultural productivity much more than on communal lands, and in the case of some crops, communal lands were more efficient.

But it’s hard to make the case for the path not taken. Perhaps communal forms could have worked, I think they could have, and would have produced more prosperity in time, since they didn’t involve impoverishing people and two-thirds of the non-European globe, but… the water is passed and the argument is important not for what might have been, but for what might be in the future.

But all systems are made up of means and ends. Capitalism justifies removing the ability of most people to support themselves without working for others beyond what amounts to taxation by the violent authorities (that’s all governments. Don’t pay your taxes and eventually the big men with guns will show up, just like the knights did when a peasant didn’t meet his feudal contract.)

The means of capitalism in the modern world amount to “wage slavery,” something well  understood by they yeoman farmers who were being forced off their land in the 1800s, and who seem to have coined the phase. You will have a master and if you can’t find one, you will starve.

It’s important to separate “capitalism” and “industrialization”. Because we industrialized under capitalism we think of the two as the same thing, or perhaps as co-joined siamese twins, but it’s not hard to imagine industrializing, which is about machines and assembly lines, in different ways: perhaps with communal organizations co-owning the means of production. This is distinct from Soviet communism, in which the government effectively owned everything, leading to the normal problems of totalitarian organization. Plurality and capitalism and synonyms.

This is something you need to think through; to imagine, for yourself. Try and come up with different ways industrialization and technology could have advanced, and don’t be caught up in historical inevitability. If you think that the past could not have been any different, then you effectively believe the future is determined.

This is one of the issues of Marxism: historical determinism. When it turned out (at least so far) that the historical dialectic didn’t work out how Marx and Engels envisaged, well, the house of cards collapsed. You have to give up inevitability to have choice and the ability to adapt.

We have plenty of options for the future and do not have to make the mistakes of the past. The first principle is that if your means are bad, no matter how good your ends, your society is going to have huge problems. You can’t routinely do evil, day in and day out, and expect the some invisible hand to lead to a good world for all.

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Capitalism as Mental Illness, by Eric Anderson

It’s axiomatic that any system preying upon the vulnerabilities of the many, to profit the few, is both a moral and ethical atrocity. Capitalism embodies such a system. As originally conceived by Adam Smith “selfish interest” would theoretically extend “that universal opulence … to the lowest ranks of people.” But at some historical point his creation escaped. It turned malignant. Today, it serves only to increase the opulence of the opulent, while recruiting the rest of us to wage perpetual war against each other for survival. When, and why, did this occur? I’ll begin with a brief technical digression.

Psychologists have long used the diathesis/stress model to explain mental illness. The DSM-V defines mental illness as a syndrome of disturbances in cognition, emotion regulation, or behavior reflecting dysfunction in psychological, biological, or development processes. In medical terms, a diathesis is defined as a tendency to suffer from some latent condition. Stress defined as a state of mental or emotional strain resulting from adverse circumstances. Also known as the vulnerability–stress model, the model attempts to explain mental illness as the result of the interaction between latent vulnerabilities (diathesis) and adverse life experiences (stress).

Not coincidentally, the U.S. leads the world in mental illness. More than 50% of us will be diagnosed with a mental illness or disorder at some point in our lifetime, and 20% of us will experience a mental illness in a given year. The perversion of Adam Smith’s originally benign, and arguably beneficial early conception is to blame — and the story of John Watson marks a good starting point to the divergence.

Watson was a behavioral psychologist at John Hopkins University, who, together with his research assistant Rosalie Rayner, conditioned an infant to fear a white rat by loudly striking a metal rod every time the rat was introduced. “Baby Albert’s” aversion was then extended to white rabbits, dogs, and cats. Watson made no attempt to decondition Albert leading to severe developmental and emotional difficulties.

Subsequently, the discovery of an affair with Ms. Rayner led to Watson’s expulsion from John Hopkins in disgrace (quaint — what progress we’ve made). It’s also known that three out of four of Watson’s children attempted suicides, two of them succeeding, due to Watson employing his children as subjects of his conditioning techniques. Yes, he was a moral monster.

But the moral monster landed on his feet. He took his ‘talents’ on the road to New York City where he rapidly climbed to the upper echelons of the Madison Avenue advertising world. He did so by employing his conditioning techniques on a public totally unprepared for incessant psychological warfare. Watson also inspired Edward Bernays — known as the Father of Propaganda — who is credited with ad campaigns popularizing female smoking under the banner of freedom. In short, Watson’s behaviorism copulated with Smith’s self interest and spawned the science of exploiting psychological vulnerability for profit. Capitalism became mental illness the moment diathesis met stress.

And long before the science of psychology, theology recognized that we all possess multiple diatheses that reduce our humanity. Christianity warned us against indulging these psychological vulnerabilities. They’re called the seven deadly sins, which are: pride, greed, lust, envy, gluttony, wrath, and sloth. But virtually every religion forewarns against overindulgence in these base emotions and behaviors. Advertising, invariably appeals to precisely these base impulses.

Tying back to psychology, one’s imagination need not roam far to begin drawing parallels between these “sins,” and the ten recognized DSM-V personality disorders, known as: paranoid, schizoid, schizotypal, antisocial, borderline, histrionic, narcissistic, avoidant, dependent, and obsessive-compulsive disorders. Ultimately, one could go on at book length about the relationship between sin and psychological disorder. But for the sake of brevity, I’m certain you take my point.

As to the stress mechanism, Adam Smith supplied that with his theory of “selfish interest” providing collective benefit. And while it’s inarguable that being forced to compete in a self reinforcing and ever accelerating rat race has provided us with many industrial and technological milestones, we must ask ourselves: at what cost? The fracture of social cohesion? The immiseration of the many to benefit the few? Graft and corruption?

Over generations now, the diatheses and the stresses have combined and evolved together, entwining ever more tightly like tentacles around our collective throat. Over generations we have become inured to the impact upon our mental health. But make no mistake, the impact is real, as evidenced by a society that has become morally and ethically unhinged.

Ethically, our collective conception of the the utility of preying on the vulnerable among us is commonplace. We pride ourselves in becoming rich by selling snake oil. We turn our backs upon the poverty stricken while shunning them to makeshift camps, which we then tear down with impunity. And as amply demonstrated by the Covid 19 pandemic, we turn our backs on the oldest and youngest among us in the name of protecting the rights of the strong. We’re destroying the very planet that sustains us and massacring our fellow species that inhabit it in an orgy self-loathing masochism. Why? Why do we it find so difficult to be humane?

In a word: fear. We are taught to fear the success of our fellows by teachers aiming a fire hose of capitalist propaganda at us from the moment of conception. We are taught young to fear our precarious positions in life. And thus, we fight interminably for ascendance to the promise of opulence, displayed on TV by the Jones’ we’ll never meet. And from fear arise those close cousins: pride, greed, lust, envy, gluttony, wrath, and sloth. Oh, how well we’re taught young to fear falling behind those ubiquitous Jones’, ever parading their opulence before our eyes.

The result is predictable. Morally, our political leaders and captains of industry are insane with greed for wealth and power. How does someone need billions of dollars? And how can someone possessing billions of dollars look around the world, witness mass suffering, and do nothing about it while possessing the means to fix it? How can they use every tool at their disposal to crush the efforts of those who would try?

The answer is simple. Latent vulnerabilities, coupled with the stress of the hyper-competitive environment they were raised in, drive them insane. We all possess psychological vulnerabilities. We’re all incessantly exploited by well rehearsed behavioral tools. Algorithms, we call them now. And coupled with a conditioned creed to compete only for our own selfish interest, we’ve all grown sick in the mind.

Psychologically, we have been conditioned to accept an ethical system that treats atrocity as mundane, while simultaneously lionizing morally diseased monsters. We’re swaddled from birth in fear. We’re coddled on competition. And we age into insanity. This isn’t a portrait of a mentally healthy society. It’s a portrait of depravity on a mass scale — of capitalism as mental illness.

Capitalism and Good Post-capitalism

Let us revisit the definition of capitalism.

Capitalism, everywhere, is defined by the removal of capital from most ordinary people and the concentration of capital in the hands of a few.

Capital, in this definition, is not money. It is the tools required to feed, house, and cloth oneself.

Medieval serfs, in most areas, had access to capital. They had the right to land to grow food, to take firewood, and so on. They built their own houses, spun their own clothes.

Depending on the time and place, they were healthy and relatively long-lived.

As I have pointed out before, early industrial workers, as a class, were worse off than the serfs and peasants they replaced. They worked longer, ate worse, died younger.

Capitalism is accompanied by enclosure virtually everywhere. The old rights are taken away and the peasants are forced off the land.

“Forced” is the operative word: In both England and China, the land to which they had rights — for centuries — was taken from them. If they won’t go peacefully, armed force is used to remove them. There are many, many stories of peasants in China resisting the government trying to take their land so they can hand it over to other owners.

Many people get “better” ownership out of the process of moving to capitalism. They get a better bundle of rights in terms of “property.” But most people lose their rights to productive capital.

You see this in virtually every developing country. Peasants are forced off the land, whether by law, crashing crop prices caused by unfettered “free” trade (which isn’t “free,” even slightly; Europe and the US massively subsidize agriculture), or by force. They flee to the cities, forming vast rings of slums. They are worse off than when they were peasants, in most cases, but there are no other options.

In most cases, this is done so that their country can concentrate on a few cash crops, plantation style, with a few owners making all the money.


A citizen in a capitalist economy is distinguished by having no independent ability to feed, clothe, or house themselves. They must sell their labor on “the market” or live miserably and likely even die. (People who live on the street long-term don’t, as a rule, live long term.)

The term “wage-slave” is old, used in the 19th century to talk about what was happening then.

A person who must sell their labor to another, then do their master’s bidding, is not free. Their entire working day is spent doing what someone else tells them to do. Only a very few people, under any capitalist system, have anything close to freedom. The majority of people are slaves in their daily life, free only to sell their labor.

Because most people are undistinguishable, they take the rates offered by the market, and those rates are determined primarily by how tight the labor market is, a factor that has nothing, absolutely nothing, to do with any one individual worker.

Most workers in the world have miserable lives. Those reading this may have “good jobs.” In China, they make batteries by hand because it is cheaper than using machines. Other Chinese are now hand-pollinating crops.

That’s freedom for you.

People whose lives are lived doing what other people tell them are not only not free, but because their daily life is about obeying orders, they are not used to freedom and are conditioned to expect orders.

Being a wage-slave, taking orders is ordinary to them. It’s what they expect. They don’t know what freedom is because they have never experienced it (coming from a school system which is designed to turn people into obedient drones).

Real freedom is being your own master. It’s been a long time since that described most of the world’s population.

But capitalism, meaning wage slavery, contrary to the propaganda, has not been an unambiguous move towards freedom.

In the 19th century in North America, for example, if land was unused, you could simply go work it and after a few years it was yours.

You can’t do that now.

Capitalism is about taking the ability of the many to provide for themselves and putting it into the hands of a few. The argument is that this transfer allows for the creation of more goods and services than would be possible otherwise.

But we don’t need more — let alone the vast amount of surplus we are creating. We waste a third of the food we produce. We deliberately build “planned obsolesence” into the manufacture of goods. We are vastly overproducing past our needs, and because we distribute goods through corrupt market mechanisms, many people still don’t have enough to get by, let alone enough for a good life. We could easily provide for them if what we produced were more evenly distributed and not made to break down so we can make more.

Imagine a world with no planned obsolesence, in which everyone has a small garden (indoors gardens are easy to do now, and one pilot study found 10X yields from a basement garden with LED lights), everyone has basic maker tools, and every community has a few facilities capable of creating large appliances.

We can print buildings on 3D printers now (they could have been made well, prefab, long ago).

Freedom is the ability to make your own choices, daily, about what you do with your time and your abilities, without losing everything. It is the ability to support yourself.

Feudalism was no joy. But capitalism removed even more economic freedom than feudalism did. You don’t have to believe me, believe the people who lived at the time, who violently resisted the changes. They weren’t idiots, they weren’t fools; they knew their lives were being changed for the worse. That it worked out for some of their descendents means little: A century of technological improvement accounts for much of that.

Post-capitalism, if it is any good, will restore the ability to grow and make what they need to the people. Not like feudalism, but a craft-based, hunter-gatherer society. Work 20 hours a week to meet the essentials, spend the rest of the time as you wish and choose how and when to work those 20 hours.

More on this later.

Originally from April 17, 2016. Back to the top.

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The Transition to Capitalism

One of the most important things to understand about industrial capitalism is that the lower classes didn’t want it.

Peasants did not leave the land voluntarily. They were forced off, often violently, in a series of enclosures, through which their millennia-old rights to use the land were taken together.

This was a vast, albeit “legal” (because bills were passed that made it legal), seizure of property rights. Property is just rights, and those rights were taken from the peasantry and free farmers and given to the lords.

The justification for this was that “enclosed lands are more productive,” but detailed study has found this was only somewhat true: Commons fields were about 80 percent to 90 percent as productive, and their productivity increased at the same rate as enclosed fields. For some crops, common fields were more productive.

With the the fields enclosed, the peasantry lost control of capital (land is capital). They couldn’t grow their own food, raise sheep for wool, chop down trees for fuel, and so on.

They were thus forced off the land, into the city slums, and had to work for industrialists, six and a half days a week, 12 hours a day on average. They died younger, there was far more disease, they were maimed often, and they lived worse.

They knew this. They resisted. They hated.

Capitalism, among the many things that it is, is the concentration of capital in the hands of a few people. That means access to capital is removed from most people. Most people must now work for someone else. In some times and places that work is nice, at others it is not, but it is a loss of control and choice.

Peasants and free farmers in Britain had far more control over what they did and when than factory workers. In fact, they had more control than most modern American workers do today.

Yes, they had to engage in demeaning status rituals from which we are largely exempt, but they had a type of freedom most wage slaves don’t.

The choice for most people today is to choose their master, not to choose to have no master. The local gentry or nobles did not supervise the peasants most of the time, they let them get on with their work, took their share of the proceeds, and got a certain number of days of work from the peasantry.

But they were not close-supervising them.

Again, we tend to compare today with then, but this is the wrong comparison. The comparison is then (peasant/yeoman) with then (factory worker). The first was so far superior to the second as for there to be no comparison.

Was all of this disempowerment, this removal of capital from everyone but the few, necessary for industrialization and its benefits? Did people have to be forced off the land and into satanic mills, where they worked like dogs and died young?

Or was there a better path, which we did not take?

And what are the results today? The results are, in fact, that fewer and fewer people have control over capital or the means of production, and the rest of us have to do what those people say, not just for a month or two every year and here’s a share, but for five or more days a week, with intrusive monitoring and micro-managing bosses.

They control the capital. We do what they tell us to, negotiating only who wields the whip.

That’s capitalism.

Did it have to be that way?

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The Argument for Capitalism

It is often worth stating an ideology’s argument in pure form. Let’s do that for capitalism, not because we necessarily agree, but because understanding why people believe in an ideology is important.

If someone buys something, it is because they want or need it. Giving people what they want or need is a good thing. Capitalism produces the most utility of any system because it makes limited judgments about what people want or need and because every time someone does buy something that gives whoever provided it more money. The more people who buy something, the more resources those who provide those things have.

This simple message is: “Do more of this.” If, on the other hand, not enough people want something at a high enough price, a simple signal is sent: “Do less (or none) of this.”

Thus, capitalism has a feedback system which makes sure that society produces more of what people want or need the most, and less of what they don’t want or need.

Capitalism makes no judgments about what people want or need except, “Will they pay enough?” (Other systems, like government, will make some judgments, capitalism does not.)

Capitalism thus requires nothing of people but that they act in their own self interest: Buying what they want or need and selling whatever they have to sell for the most they can get.

This means resources, including people, will be used in whatever people are willing to pay the most money for, and thus will be allocated to what people want and need most.

Thus, capitalism, compared to other systems, creates the most good, and (if done right) avoids coercion and the need for a lot of central authorities making decisions.

Of course this argument is wrong. Anyone with sense can pick it apart.

But, to paraphrase Churchill on Democracy, capitalism’s boosters say “Capitalism is the worst system, except for all those others which have been tried.”

Capitalism isn’t perfect, it doesn’t work close to the “ideal type” described above, but, what else is there?

That’s the argument for capitalism in a nutshell. It’s a powerful argument, and while its flaws are evident, it can’t be dismissed out of hand because due to the problem of alternatives. So far, the best alternatives appear to have been mixed economies, with markets in charge of part of the economy, and government and non-profits in charge of the rest. But those economy forms appear to break down in time, as the post world-War II liberal (not neoliberal) economy did.

Today, we look to the Scandinavian model of social democracy, but even there we can see some problems beginning (in particular in Sweden, as best I can tell), and, after all, a large part of the economy is capitalist and enmeshed in a global capitalist network.

So, is there genuinely an alternative? Boosters say no, and it’s a real problem. That doesn’t mean there is no alternative (Thatcher’s famous phrase) but that too few people–especially powerful people–accept that there is. Indeed, our debates are mostly about forms of capitalism, and under how much and what type of control markets should be, not about capitalism itself.

An ideology which can make it look like it is the only way to do things is a powerful ideology.

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The Control and Continuation of Capitalist Societies

Image by Admit One

Markets have existed for millennia. Capitalism has existed for millennia. The Romans had markets and capitalism; the Greeks did; the Assyrians did, and so on.

(This is Part Two of a series. Read Part One: Will Capitalism and Democracy Survive?)

But none of these societies, despite having capitalism and markets, were capitalist societies.

Capitalist societies use capitalism as their primary method for controlling economic activity.

Weber called this “rational capitalism.” What he meant was that capitalism transformed, according to its reason, other relationships so that they became capitalistic.

A capitalistic relationship is one that is determined by money. It is traditional to say it is controlled by price and the profit motive, but that’s not quite true.

Uber is losing money. A lot of money. It might never be profitable. Elon Musk’s companies do not make money, though they may in the future. The banks and brokerages of the 2000s went bankrupt.

In a capitalist society, people do what gets them the most money.

What is important about this is that in capitalist society, money equals power, much more so than in other societies.

In a capitalist society, money buys people and their time. It buys virtually everyone. It allows you to decide what those people do. (Read: The Tyranny of Money.)

What is important about this is that it means that people who do what the system requires are the people who get power.

If you don’t respond to monetary incentives in a capitalist society, you usually don’t get power. Not only that, you are generally deprived of power.

So a capitalist society ensures its continuation by making sure those with power are those who do what a capitalist society requires: Pursue money.

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It’s hard for us moderns to really grasp this. In the Dark and Middle Ages, most societies were not capitalist societies. Most people were tied to the land. They did not work primarily for money, they worked for their lords for X days a year, or during a call up for war. But the rest of the time, they worked for themselves or their families.

You could buy some people with money, but you couldn’t control most people with money. What mattered was a system of allegiance, and military force.

Power got you money more than money got you power. People who forgot that lost both.

This is generally true in most agricultural societies for most of history, though it’s not an absolute.

In the Roman Republic, most rich men were rich because they were aristocrats with land or because they were successful generals who had looted their wealth. Only one of the great men competing to be Empire and end the Republic, Crassus, had most of his power due to wealth and he did not win.

The extent to which a society is capitalist can be determined by how many people you can buy, and how much of them you can buy. A peasant may do letting out labour in the evenings or odd jobs, but you can’t buy most of his or her labour. A nobleman may do some things for money, but not most, and the official ethos of nobility was that to engage in manual labor or mercantile activity was to de-grade yourself and lose your noble status.

In our society, you can buy virtually everyone, including the most powerful politicians. (For all that people deny it, much of Obama’s policies could be predicted by “wants to be rich after office”–I said that long ago, and its predictive utility was high.)

Your ability to do that to high nobles was often limited: If they got upset enough at their bankers they would just kill them or exile them, and seize their assets. This happened over and over again. At best you rented kings and high nobility: Lending to them was a privilege, you did not own them, and if you thought you did, that worked out badly for you pretty often, though, of course, this was not the case in all places and times.

A social system perpetuates itself when it gives power to people who act as the social system thinks is correct.  Capitalism perpetuates itself as long as power goes to those who pursue money first. Feudal societies were about the ability control fealty, especially of militarily capable men. And so on, you can analyze most societies this way.

This breaks down in three circumstances: when the society selects people who don’t respond how they are supposed to (late Communist leaders not believing in Communism); where leaders are incapable of running the society even if in power, or; if the basis of power changes (if military power is no longer based primarily on fealty relationships, for example).

This can, and should, be applied to capitalism.

(Read Part 1: Will Capitalism and Democracy Survive?)

The next part of this essay series will look at the question of system flaws: What systems, in particular capitalism, do badly, and which must be managed lest those flaws bring the system down.

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