(In the following often Tom's ideas and my own interpretations are mixed together, but sometimes explicitly differentiated.)
In very broad terms, capitalism is an economic form where a substantial
part of the profit is reinvested rather than consumed or dilapidated. Very
quickly this gives an explosive character to the capitalist economy, because in
principle the reinvested sum will grow exponentially. But the functioning of
this system poses additional requirements of varying importance:
- Rule of law, in order for the
economic agents to maintain the interest to invest; they would lose this
interest if they can be arbitrarily deprived of their property or of their
“interest”.
- This to an important extent
requires the separation of political and economic power (so that laws are not
bought and that the law applies equally to the rich and to the poor); otherwise
it will degenerate into cronyism (more about it below).
- To maintain this rule of law and
separation of powers, a certain culture, moral and ethics are required. First
of all, the tolerance of alterity and the existence of free agents that I do
not own and cannot force, but whom I have to persuade (although the border
between force and persuasion is somewhat hazy) – this maintains the differentiation
of the society in general and of the economic order in particular. On the other
hand it requires important social cohesion and integration, some general
consensus or mutual trust in the society. Without this trust, again, the
investments cannot be safe.
- The acceptance of otherness is
related to three important concepts – competition, lack of central planning and
emergent order. Competition requires independent free agents (no slaves, no
monopolies or cartels). This in turn would require the lack or perhaps a strong
restraint on central planning, because such planning would reduce freedom and
alterity, and distort the situation in economically inefficient ways. So, in
general terms, this means the preference of emergent order over planned
one.
- Readiness for innovation and
tools for it – in the first place, education, and in the second place, and
important edge in favor of innovation and change. Economic innovation and
social change are inherent in capitalism, in the sense that this form of
accumulation leads to technical innovations which lead to new forms of human
relations. Every society has in itself a dialectics of traditionalism and
innovation, and both are necessary, but for capitalism to thrive, innovation
must maintain the upper hand. This is the “creative destruction”: new forms of
production and social relations are formed, and old ones become obsolete, and
the society is ready to adapt to these changes rather than trying to swim
counter to the economic current.
- The concrete form of competition
and the tool of economic emergence is the differential of profits and losses.
If innovations would be the equivalent of random mutations in darwinism (most
of which are deleterious or useless both in nature and in culture), then the
differential of profits and losses would be the equivalent of natural
selection. If you lose too much, you are eliminated from the forefront of the economic action. Even though humans are
conscious agents, still this differential works to a great extent blindly. We
simply cannot predict for sure what is profitable in the future, and very often
we make wrong guesses. And this trial and error is essential to capitalism.
Tom Palmers brought out three rectification of metaphors about competition,
exchange and profit. According to him the habitual metaphors about competition are “dog eat dog”,
“cutthroat” etc., so that competition would be reckless or indifferent at best,
whereas in reality a capitalist competition serves the interests of cooperation
(between the producer and consumer, if I understood correctly: I compete with
other producers in order to cooperate with my consumer). The metaphors about exchange present it as selfish and
greedy, whereas a free exchange is in principle a win-win situation and useful
for both parties (I get what I need and the seller gets money with what s/he
can get what s/he needs) – a demonstration of which would be the mutual
thanking in case of a commercial transaction, whereas in case of a favor only
one party thanks and the other says that it was a pleasure etc. And profit is presented as “obscene” or
“windfall”, whereas it is just the economic reality principle to test the
innovations; and the amount of profit would measure the amount of value added
to the product.
To comment on these three, I would say that 1) in an ideal state of affairs
we could say that competition would indeed be ultimately cooperative, but in
the modern world there are lots of ways of violating this principle: e.g. a
large amount of goods commercialized do not intend so much to “cooperate” with
the consumer, taking into consideration his/her health and wellbeing, but
rather simply to capture his/her imagination and affects, so that s/he would
buy it even if s/he doesn’t need it or if it is noxious to the health and
wellbeing (coke, fast food, beer, fast loans etc). Of course it is a good point
that in economy the competition cannot or should not mean destruction of
competitors and consumers. But then we should be more precise about competition
and denounce faltered or biased forms of competition (from corruption all the
way to forms of psychological insinuation). 2) Similar considerations apply
also for exchange. Consumerism often means a win-lose situation when we buy
things we don’t need. We cannot presume a wholly rational subject. 3) The story
about profit applies better to old forms of industrial production, where the
capitalist or owner of the factory depends to a large extent on his workers,
and is induced to share his profit with the workers (although still most often
strikes and trade unions are needed to do the job). The story about added value
becomes much more vague in case of modern financial products, where the biggest
profits are made. Is it really value added? Or is it just an abuse of power of
economic agents who know how to exploit some features of the financial system? Of
course we can argue that the abuses are even worse in other, non-free
economies, but still it means that social and cultural control is crucial – and
this doesn’t necessarily have to take the form of federal regulations, but can
arise from the bottom up, from the cooperation of “99%”, etc., that can force
those financial agents to comply with the common good (although the success or
failure of such kind of pressure still has to be seen).
One of Tom’s central points was that the antithesis of capitalism today is
not socialism any more, but cronyism
that defies the principles of meritocracy, equality, lawfulness, and where the
state apparatus is used to extract privileges. Whereas a free-market capitalism
would mean a net gain for everybody (the society as a whole is richer than it
used to be half a century ago), cronyism is very profitable to a small amount
of people and disastrous for the society as a whole (both in terms of wealth
unlawfully appropriated and in terms of hampered growth). This I take to be a
good point.
The problem is that there is some amount of cronyism always (and Tom Palmer
acknowledges that US economy has become to a considerable extent cronyist, with
powerful lobby-groups in Washington, and public bailouts for private losses –
so that the reality principle doesn’t work well any more). Now, the problem
when we propagate free trade economy and minimum state intervention is that it
can in fact enhance cronyism. I am not able to judge, whether or not the
deregulation of financial markets would have been justified, if later there
would have been no bailouts, allowing those who took the risk, to bear the
losses. But let’s take a scenario: first a branch of economy is bred in a
country, subsidized and protected by tolls. When the production has taken off
and become industrialized and efficient, then we go and tell another country to
do free trade with us (perhaps backed up with our military power), so that we
can bring in our cheaper goods in large quantities, and effectively bring the
country’s own respective sector to a standstill and forcing it to depend on us
from now on. Is it really free economy? Actually we couldn’t consider it as a
fair competition and free exchange, because in past (and perhaps continually in
present) we artificially create favorable conditions for our firms, and unfavorable
for those in the country we force into free trade (and wouldn’t it be a new
form of colonialism?).
Tom stressed that capitalist production is not only about greed and
selfishness, but also about mission. This sounded a little bit doubtful. Can we
really rely on capitalists’ sense of mission for them to be socially
responsible? Especially in these days of globalization, where one can move one’s
enterprise easily from one state to another, from one country to another,
perhaps repeating the same predatory methods as in previous places?
I think that, again, several forms of social pressure are necessary to
counterbalance cronyisms, lacks of mission and social responsibility etc. Tom
didn’t dwell much on those forms of social and political activity; but he did
bring an example of his own experience. To counteract Reagan’s initiative to
impede the import of steel from Asia and the Soviet Union, he convinced
Caterpillar that this measure would not be good for them, so that they started
to support him. This seemed to be also his general advice: to counteract
cronys, find those whose interests are harmed, and fight together. I would like
to broaden the scope of this activity – it is not only about influential
corporations whom to convince to fight for a cause, but more generally civil
society should organize itself – and in a free society this must have an impact
(not only during the elections, but also between them). But then again,
multinational corporations these days are so big and influential, that even any
single country (USA included) might be unable to fight their cronyizing
tendencies. I think we are in need also of a multinational civil society. I
hope it is being born these days.
Again, Tom Palmer presented well known correspondences between the economic
and political freedom of the society, and of its wealth. The societies that are
most free both economically and socially, are also the wealthiest, and those
with least freedom, are among the poorest. But I am afraid that even if this
trend is true generally, the recent history doesn’t support this beautiful
picture so well in very many particular cases, since there are examples of
wealthy and/or quickly developing countries with very little political freedom:
PRC, Russia (prior to the affair in Ukraine), several arab oil-producing
countries... It seems that new symbioses have been found between central
planning and free market (most notably in PRC), and also of marrying this with
censorship and limited social freedoms. Of course, they could be defined better
as crony-capitalist countries, but I think this brings out the fact the hope of
“first developing economy, then gaining political rights” is a merely empirical
regularity and might not work in the future or in particular cases. It would
mean that we must from the start demand also political rights – because it does
seem logical that at least in the long run it would hamper also the economy, if
human rights are violated and political rights reduced.
I think that we could redefine right- and left-wing: they would not be a
support for, respectively, capitalism or socialism any more, but they would
differ rather in their emphasis: right-wing would consider problems resolvable
in strictly economic terms, whereas left-wing stresses more social and cultural
aspects. I think it is more a difference of stress and focus, rather than a
heated “cold war” of ideologies. We have seen that capitalism cannot exist
without a certain legal, social and cultural context, and also to
counterbalance its opposite, i.e. cronyism, several forms of civil and social
activism, organization of people are needed – and new forms for this must be
invented. To sum up, I would agree to much of what Tom Palmer talked, and I am
equally suspicious of centrally planned economy and of cronies. But still my
focus is somewhat different (left-wing, in the redefined sense), bringing in
social and cultural factors, and the necessity of finding ways of fighting the stagnating
state power and usurping cronies.
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