What is Capitalism?

What is Capitalism?  It seems like a fairly straight-forward question, at least around these parts.  For most people on the right, if you ask them to picture Capitalism the skyline of Hong Kong will pop into their minds – or Ron Paul, as a symbol of Libertarian freedom – or the advanced technologies of the information age, perhaps.  For those on the left, however (and I mean the intelligent, hardworking liberals who believe in equality – not the Leftoids who run the whole show), they envision suited cronies passing around favours; the perpetually destitute, being foreclosed on by banks; the race to the bottom, as companies compete to see who can manufacture the shoddiest products.

What we have here is a failure to communicate.

Neither group can be really be called “wrong” – not unless you’re trying to live in a right-wing bubble as ignominious as the Leftoids we criticize.  The people who describe Capitalism negatively are simply defining the word in a different way from those on the right.  Keep in mind, these aren’t 1950s communists, whitewashing the crimes of the Soviet Union – these are decent people who are pointing out real – not imagined – flaws in this collapsing civilization.

So with that in mind, I think it’s a topic worth revisiting.

Capitalism ≠ Economic Theory

This is a mistake we on the right often make; we say the word Capitalism, when what we mean is Economic Theory.  Capitalism is an applied sociopolitical system, while Economic Theory is just that – a scientific theory based upon the observed laws of aggregate human behaviour, and an attempt to explain and predict future behaviour.  Economics just is – in the same way the theory of gravity just is, and it applies in all situations where there are exchanges going on within a complex system.

• It exists in multiplayer video games,
• It exists in predator/prey populations,
• It exists within large companies,
• It exists inside Communist countries.

Essentially what we have here is the failure to make an is/ought distinction: Economic Theory simply describes how things are, while Capitalism says how they ought to be.

That said, once you have arrived at an ought in the sociopolitical realm, Economic Theory usually has something to say; and this is where the left and the right come into conflict.  Quite frankly, Economic Theory is something that people on the right are far more familiar with than those on the left, and as any advanced science, its got some weird stuff to say.

Economic Theory is Deep Magic

Most sciences are self-evident in retrospect; that is, once you understand the principles underlying their conclusions, it’s hard to imagine how the world could be otherwise.  Prior to learning the principles, however, science can be downright counter-intuitive.  For instance, it’s pretty self-evident that objects fall at 9.80665 m/s²; all you have to do is drop an object and watch it accelerate, and yet for thousands of years nobody noticed this.  Up until Sir Isaac Newton came up with his laws of motion in the 17th century, they thought that objects fell at a constant rate – and that’s just kinematics.  When you start getting to the advanced stuff such like Relativity, understanding why you can’t travel faster than the speed of light needs more than just casual study.

Economics is no different.  It is both a fundamental aspect of reality, and it can be extremely counter-intuitive on the advanced-levels.  Even worse, because it is such a politicized field, there are armies of Yes Men whose primarily job is to justify policy, rather than advise it.  These are men who use esoteric terms to confuse their audience, while offering the comfort of an Appeal to Authority: “Don’t worry, folks, the experts have it well in hand!” The proper term for these people is Voodoo Economists.

Source: Futurama 4ACV16, “Three Hundred Big Boys”

Given that I find black magic repulsive, let’s ignore these snake-oil salesmen, and concentrate on a couple of important economic lessons which are theologically sound:

1. “People Respond to Incentives” aka “Do Not Feed the Bears”

This is a fairly basic assertion, and yet it has some implications which most people choose to ignore.  Most people realize that the less you charge for something, the more that people will consume, but they only view it along the two dimensions of supply and demand – they completely ignore the third axis of time.

Lowering the price of any particular good doesn’t just change the aggregate behaviour of consumers at the present moment – it changes their habits going into the future.  This is something we’ve seen repeatedly with gas prices: as the gas prices go up, people start to commit to long-term purchases of fuel efficient vehicles.  They’re not just choosing to postpone their road-trip today – they’re committing to future habits for the next several years.  Markets mature over time, and adapt to the circumstances.

This maturation of markets is what leads to the saying “If you want more of it, subsidize it; if you want less of it, tax it.” Have you noticed that College tuition is exorbitantly expensive these days?  That’s because it was subsidized.  At t=1, a $1000 bursary benefits the students who are presently attending post-secondary; at t=1+x, there are now more students competing to get in, and the Colleges responds by raising tuition rates, since more seats haven’t opened up.  Keep this up for long enough (say, about 50 years or so) and College winds up becoming so expensive, that if a student chooses the wrong degree – say, computer programming, back before Indian programmers bottomed-out the market – they wind up massively in debt, with no ability to pay it off.

Or, we can look to the case of charity: subsidize it and you’ll get more of it.

This is the part liberals balk at, because it sounds mean, heartless, and cruel – and yet economics is just economics.  It’s no different than explaining to a child that drinking bleach will kill them.

When it comes to charity, we need to ask ourselves: is this a one time event, or an ongoing subsidy?  On the one hand, if you have a single disastrous event – say an earthquake, flood, or war – the desperate refugees that come out of it will need comfort an aid; basic human charity dictates that we do what we can to help them.  If, on the other hand, what you have is a systemic problem – such as poverty in Africa, for instance – charity will do the exact opposite of what you’re trying do.  This is when you need to start thinking economically.  Feeding the bears will cause massive boom/bust cycles in the bear population, because they’ll grow dependent upon humans, and it’s no different with Africans – it’s all economics.  Sending monthly charity to Africa encourages dependence, and can even undermine local entrepreneurs: free food and free clothing puts farmers and tailors out of business, and those people are the basic building blocks of an economy.

You might feel good, engaging in this sort of systemic charity, but all you’re actually doing is hurting people.  That’s not my opinion, that’s not right-wing cynicism, that’s a fact derived from iron-hard economic law.

2. The Pareto Principle

This was a concept introduced by the Economist Vilfredo Pareto at the turn of the last century, and it can be summed up as “80% of the effects come from 20% of the causes,” aka the 80-20 Rule.

This is not just in economics; this is not just in Capitalist societies; this ratio appears in all things.

• 20% of a firms customers will provide 80% of their revenue,
• 20% of a plant’s leaves produce 80% of its energy,
• 20% of a generation will produce 80% of the next generation,
• And, yes, 20% of the people will hold all the wealth.

This is something I covered in my article “There Will Always Be a 1%“; what this boils down to is that, even in a perfect Communist system, “Some workers will be more equal than others.” There will always be an elite: whether it’s aristocrats, CEOs, or Commissars, they ain’t going anywhere: fighting against the 1% is like fighting against the tide.

Ask not, “How can we achieve equality?” Equality is a chimera – we’re never going to have it.  Instead, channel Karl Marx for a moment and ask yourself, “Who?  Whom?” This “equality” that’s being talked about – whether it’s the rich paying their fair share, or affirmative action to overcome a privileged class – is never going to happen; accept it.  But somebody’s going to make a profit out of this whole equality movement; who could that be?

If you think it’s the middle class or the underprivileged, you’re not thinking hard enough.  All you’re doing is shuffling pieces around the board.  You might be shifting power from the privileged to the underprivileged – or money from the rich to the poor – but neither of these groups are part of the 20%.  Race-baiting political arguments never address the 20% at the top, who have 80% of the influence – all they do is shift power around amongst the 80% of the population (white and black) who have 20% of the power.

Qui bono?  Give that question some serious thought.

The Problem with Capitalism

At this point, you might be saying: “But what about the Golden Parachutes?  What about the crony-capitalism?  What about the lobbying industry?”

Here’s the thing: us Capitalists on the right are trying desperately to fight them!

The irony of the word Capitalism is that it was coined by Karl Marx as an attack on the system in Britain; back in the 19th Century nobody but Communists used such a term, a term derived from hatred of the Capitalists who owned the means of production (remember the Pareto Principle, 20% of people will always own 80% of the means of production, if not through property law than through political influence); and yet, this term which was supposed to insult countries that embraced free-market economics, wound up being embraced by them instead.  Free-market economies are – overall – such a roaring success, and they’ve seen such a dramatic increase in the standard of living, that Free-marketers embrace the insult.

Yet none of those critiques mentioned above are considered “Capitalism” by its adherents; quite to the contrary, they’re considered to be the results of socialist interventions which undermine the purity of a market economy, and they are very much modern problems.

Now ain’t that funny – Capitalism has two different definitions, depending on who’s using it.  When somebody on the right uses it, they mean the freedom from being bullied by a commissar; when the left uses it, they mean plutocrats who buy their way into power.

What, you think that’s a bug?  No, that’s a feature.  The breakdown in communication is part of the system.

To call oneself a Capitalist is to assert that Economics is a true science; it’s making a descriptive statement about reality, not a normative one.  In fact, the vast majority of self-titled Capitalists do not place wealth at the top of the pyramid of virtues.

Economics exists to analyze complex systems; it is present within all of them.  It can help you build an efficient baby-bottle factory, or an efficient death camp; like all science, it is inherently amoral.  It is up to us, then, to implement it in a system which is founded upon moral principles; a society which recognizes humans as ends in themselves, not as means to be manipulated.  This, I think, is what liberals are angry about – that we’ve been reduced to means, to satisfy the ends of an irresponsible elite who are shirking their duty.

Socialist — Capitalist
Occupussy — Teabagger
Nanny State — War Machine

They are two sides of the same coin!

 

All of that said, I ask that you consider the past 50 years of history: which side has been winning?  Over a 50 year time-line,

• Do any minority groups have less legally-sanctioned rights than 50 years ago?
• Have taxes decreased?
• Has regulation become more laissez-faire?
• Have social services declined?
• Has the military become more isolationist?

Upon every metric you can imagine, the Left has been winning; anything they wanted back in 1950 has been accomplished, and as for the Conservatives, they’ve been reduced to begging for the good old days of 1970.  And yet…

• The middle class is eroding,
• The Negro community is at its worst state since the years following the Civil War,
• The elites are increasingly unaccountable,
• Jobs are being shipped overseas,
• The police state is growing,
• More children are being raised in poverty,
• More and more people are reporting dissatisfaction with their lives.

Maybe – just maybe – this isn’t a bug; it’s a feature?

Social Justice does nothing but shift privilege amongst the least-powerful 80%?

Your hatred of self-described Capitalists has only resulted in your economically illiterate?

And by supporting the Leftoids, all your doing is further empowering the 20% that treat you like scum?

Ah, but what do I know?  I’m just a cisgendered white male.