VINDICATION?
I’ve been asked by the few people who have taken the time to stomach some of my harsher critiques of our current form of Capitalism over the past few years whether or not I see the current financial crisis as some sort of vindication of my ideas. It has taken me some time to make a decision about that, but the short answer is: yes.
My principle argument about the self-destructive qualities of Capitalism has been many-pronged. Some of these prongs are not particularly relevant. My favorite deals with Capitalism’s requirement for unending expansion. While I think this is a perfectly valid point to consider, I can’t make a conclusive argument about its impact on today’s crisis.
The more relevant argument deals with the financial sector and the business of those who make money by dealing with money: investors, traders, speculators, etc. The core problem I have run into when talking about this with those who either aspire to become a participant in the financial sector, or with those who are simply admirers who hope to benefit from these practices now or at some point in the future is the claim that it is more complex than it could possibly look from the outside, and those who are not practicing cannot possibly understand its importance. This argument to me is akin to the religious argument that God works in mysterious ways and His truth, goodness, and existence is thereby unquestionable; an absurd justification, in my opinion.
So, speaking from the outside, the practices of the financial industry are self-destructive for the following reason.
The basic idea on Wall Street is to produce money by moving money. I’ve heard the phrase “you need money to make money” repeated without the batting of an eye by many respectable and intelligent people in my life, and this surprises me greatly. Currency is nothing more than the universal equivalent. In some economic epochs it has been an equivalent for goods more generally, and to some degree that is still the case. But more specifically in Capitalism it is the universal equivalent for productive labor hours. At its core the game in the financial industry is to create the equivalent using only more of the equivalent, without producing goods and without engaging in productive labor. This is not a complicated idea and no amount of business schooling or time spent engaging in this behavior can make it more complicated or less absurd. If there is any practice that this can be related to in a glorified fashion it is gambling. I’ve gambled a bit in my life and certainly wouldn’t mind winning the Powerball, but I could never convince myself or anyone else that going to the tracks, studying the horses and making a correct educated guess about investing money in a winning horse is in any way a productive activity. Now nobody at the tracks or on the Vegas strip is going to contribute to the collapse of major economies. However, it is the same activity that is the driving force of the industry whose success or failure correlates directly into the success or failure of world economies.
Now I don’t think this crisis is the end of Capitalism. Or even that any part of this world is ready for a major overhaul of the principle underpinnings of our economic systems. Those who know me know I am an admirer of Marx, Engles, and to some degree, Hegel. However as with any philosophy there are parts to appreciate and parts to call outdated and parts to dismiss on their own absurdity regardless of timeframe. Being a critic of Capitalism does not mean that feeling vindicated today makes me happy, or that it makes me search for that sickle I must have hidden away somewhere to head out to behead the fat-cat Capitalists and lead a revolution. Many radical socialists or communists have been revolutionaries; I am not. I hope that the crisis, whether or not it continues, allows people to open their eyes to some of the self-destructive qualities of our society, and allows them to get over fear of outdated catch phrases and misunderstood notions dealing with the big bad word: Socialism.
“The basic idea on Wall Street is to produce money by moving money.”
This is kind of true, but in reality all markets are (even in their most complex forms) are ways for determining the price of goods and services. Wall Street does not “produce” wealth. People produce the wealth by creating goods and services that are worth something. Wall Street allows people to facilitate the production of wealth through investment which means they get a portion of the value of the goods or services created. It also encourages the abatement of worthless goods and services through the market by harming those that invest in worthless ventures. Its a big system of defining the monetary value of complex systems.
This means that the money “made” on Wall Street did not come from Wall Street itself. It came from the productive capacities of the individual human beings working in companies traded publicly on Wall Street.
Part of the deal with having ideas that are not widely accepted is that they tend to have a core disagreement with what you would find in a basic textbook definition of the subject matter. While I appreciate your near copy-and-paste response here, you’ve given me no reason to re-think any of my thoughts on the matter.
whoa kids, getting off to a good start.
i tend not to get involved in things i don’t know much about, this being no exception. usually there’s a reason i don’t know much about something. while i don’t find the markets interesting, i do find them entertaining, much in the same way i’m sure to find this exchange.
play nice, cheers, ac;
haha… yeah off to a good start by insulting the author’s intelligence!
So my real criticism of your argument is that I think you are arguing two separate lines here. One is that you find certain elements of Capitalism either untenable or somehow morally/philosophically offensive. That is fine, but along those lines I think you mischaracterize what the market is. It is not gambling, it doesn’t create money, and it is not reliant on constantly expanding. In the US we have gone through decades of no or negative growth while still being capitalistic. There are also countries that have free, capitalistic markets yet no major increases in production currently. I think the financial market is also not as opaque as you make it out to be when referring to people describing it. It is not that “God works in mysterious ways” it is much more like a systems biology problem. There are a lot of inputs into many different and highly interconnected equilibria. It is a complex system (or set of connected systems) but hardly a godly ineffability.
The second line of argument seems (at least to me) be that Socialism is required to remedy the negative consequences of the free market. I think a lot of people would consider true socialism and capitalism to be mutually exclusive. However, it looks like “socialism” (little s not big S) is perfectly compatible with capitalism at least empirically. I suspect by your “big bad word” socialism you mean a kind of European socialism which I would argue is really capitalism encumbered with a lot of government mandates in order to “soften the edges” of pure unfettered capitalism. If that is the case (please tell me if I am wrong) then I would argue that kind of socialism absolutely requires capitalism in order to allow for the creation of wealth that pays for socialism. Without it you end up with a Soviet Union rather than a Communist China or a Socialist France.
I also agree that there are “self destructive” qualities to capitalism. But I believe that some of them are absolutely necessary to the proper functioning of an economic system. I also believe that mandated reforms must be extremely carefully enacted because of their coercive and often unresponsive nature… I will have to get into that later because I have to finish my assay here at work.
acosta your ignorance is alarming. I am glad I can entertain.
Oh right… and tcosta don’t worry I only copy-and-pasted your quote. The rest I actually penned from memory, but don’t worry from now on I will remember that you know basic economics even if you chose not to employ them in your arguments. (I kid, I kid…)
First, I did not insult your intelligence I responded to what I thought to be a half-assed argument that was a “*near* copy-and-paste” (note the operative term there) from a textbook. Nor did I claim that you had to go reference a textbook to bolster that comment.
On to other things…
“One is that you find certain elements of Capitalism either untenable or somehow morally/philosophically offensive.”
While this has some very small amount of truth to it (in fact my opinion is much more complex, and in many ways I believe the development of Capitalism to be a necessity and by and large a good), I believe you find certain elements of Socialism similarly, and I believe that to be the driving force behind your uncommitted comment earlier, and thus my response. However, your reference to three governments who in no way engage in any respectable (note: opinion) source’s definition of Socialism is alarming given your willingness to lay claim to knowledge over its (singular isn’t really proper here) systems.
“That is fine, but along those lines I think you mischaracterize what the market is. It is not gambling, it doesn’t create money, and it is not reliant on constantly expanding.”
Speaking of “the market” I have no issue with the first two of your assertions. And unless I made a drastic typo, I never made any claim counter to this about “the market.”
I made it about those speculators and traders who engage in no productive activity other than to produce currency via the movement of currency and the productive labor of businesses with whom they have little to no connection.
“In the US we have gone through decades of no or negative growth while still being capitalistic. There are also countries that have free, capitalistic markets yet no major increases in production currently.”
I’d stress the importance of ‘currently’ in your second sentence there, and the importance of the time limit in your first. Over the long haul this is irrelevant. At no point did I claim that at all times Capitalist markets experience growth; in fact I would never have had reason to write the article in the first place were that the case. However, find me a reputable source that has evidence of a successful Capitalist market that has shown an overall system of no or negative growth. I’m convinced that you could never qualify that market as “successful.”
Furthermore, when I speak of the Capitalist system I am not confining myself to one nation’s borders. To do so is absurd. The Capitalist economy today is an interdependent one as Tokyo’s 9% market fall two weeks ago is a good indicator, and certainly there are others in positive and negative directions.
“It is not that “God works in mysterious ways” it is much more like a systems biology problem. There are a lot of inputs into many different and highly interconnected equilibria. It is a complex system (or set of connected systems) but hardly a godly ineffability.”
Unless you were trying to show me some small amount of agreement, it is becoming difficult to take your response seriously given that your need to make this exposition means you must not have actually read what I wrote.
“The second line of argument seems (at least to me) be that Socialism is required to remedy the negative consequences of the free market. I think a lot of people would consider true socialism and capitalism to be mutually exclusive. However, it looks like “socialism” (little s not big S) is perfectly compatible with capitalism at least empirically.”
Right. Which is why I am encouraging a deeper understanding of Socialism while specifically separating myself from those who cry out for revolution under the premise that Capitalism is A) a wholly corrupt and immoral system and that B) the two are mutually exclusive. Again I wonder if you read what I wrote. Of course Capitalism and Socialism are not mutually exclusive empirically. It is only in the philosophical setting that the two are even discussed as such in any way worthy of consideration. In fact, at the origins of the sort of Socialism that I personally enjoy studying (note: has never been in practice), there is an understanding that Capitalism is the necessary breeding grounds for its development.
“I suspect by your “big bad word” socialism you mean a kind of European socialism which I would argue is really capitalism encumbered with a lot of government mandates in order to “soften the edges” of pure unfettered capitalism.”
I’m wondering what the point is here. Only a fool would call today’s practiced forms of Socialism anything other than how you just described it. And no, that is not the form of Socialism I advocate. Although I certainly think there is merit in enhancing the quality of life of a citizenry through the development of government programs.
“If that is the case (please tell me if I am wrong) then I would argue that kind of socialism absolutely requires capitalism in order to allow for the creation of wealth that pays for socialism. Without it you end up with a Soviet Union rather than a Communist China or a Socialist France.”
I’m drowning in uncertainty here. First, as above stated, that is not the sort of Socialism I advocate. If you want to talk about the development of different kinds of Socialism I’m happy to, however, you’ll have to be a bit more elaborative about this comment. As it stands right now I am not sure where to begin on how widely I disagree with your apparent understanding of how you “end up with” a Soviet Union, rather than a Communist China, rather than a Socialist France.
Sorry for the confusion but I felt bad insulting *your* intelligence with a 101 contention to a more serious argument
In response to your first response:
I think the confusion here is an uncertainty over what we both mean by socialism. I mention the three different countries as examples of varying degrees of government command over the economic activities of their citizens.
My question for you is then this. Since none of those governments are socialist (and I agree with you that you can certainly argue that they are not) does there exist a country that is Socialist or at least a good example or is the Socialism you are referring to the ideal of Socialism not yet in practice anywhere?
The second response:
I only take issue with saying that speculators and traders “engage in no productive activity other than to produce currency via the movement of currency…” That is absolutely a productive activity. They only make money when they move capital from over-valued ventures to under-valued ventures. They provide a service that has value and utility.
The third:
You would have to prove to me that a capitalist system requires growth when it has clearly survived long periods of no or negative growth. You would also have to prove that it is desirable. If there was no population growth maybe. But since there is population growth then a static economy would mean an overall reduction in standard of living as population grows.
I also completely agree on the interdependence of global markets.
I think the rest of our discussion can be summed up as confusion over what exactly you want to see? I am assuming from your original article that you are not talking about more “classical” forms of Socialism such as government or worker controlled means of production and you are not talking about European socialism (i.e. socialized medicine and welfare). What aspects of capitalism should be removed? What aspects of socialism should replace them?
So I emailed Greg Mankiw a famous macroeconomist asking about whether capitalism requires growth (most of the writing on the internet is crappy on the subject).
“I think the short answer is no.
The long answer is too long for email.”
So n=1 at least.
Reasonable questions, I won’t have time to answer them until tomorrow probably. But I like where this is going!
oh you just wanted me to invite you to lay out your plan for a socialist new economy!?
Hah, well, I can’t say that was my original intention, but generally as I go through life I’m always eager to find that opening.
Still not yet though, gotta find a good chunk of time.
It is no secret that my notion of Socialism, which I loosely call “classical,” was born in my studies of Hegel and Marx. I have subsequently studied many who have further developed these ideas, as well as those who have bastardized them, or ineffectually implemented them.
Firstly, I wholeheartedly subscribe to Marx’s materialist conception of history. As such, I find it irresponsible and incomplete to discuss economies as if intangible or abstract from other social matters or from political structures. For me (and Marx), human society is a society of production. Our other social structures are a necessary and ‘caused’ set of agreements entered upon out of necessity to facilitate a given epoch’s methods of production. This accounts for everything from government to religion. It is for this reason that I disagreed with your contention that I see Capitalism as untenable or undesirable. Every major shift in productive methods has brought with it great improvements as well as its own set of self-destructive qualities (insert Hegel reference…). The shift to bourgeois Capital de-mystified the relationship between producer and owner and allowed for nearly universal political emancipation, a strong ‘good’ to be sure! But, just as there were slaves and slave owners in ancient society (of course elsewhere, too, just speaking generally), and serfs and landowning nobles in feudal society, there are proletarians and capitalists in modern society. Certainly the nature of this relationship has been fundamentally changed in the Capitalist era. As I mentioned before, the de-mystification of social status and political emancipation of whole populations was a fundamental departure from previous epoch’s social structure, and is thanks to the development of bourgeois capital. So for a catch phrase, Socialism, in its broadest sense, is the completion of the process of universal emancipation, extended beyond politics and into the productive facilities of mankind, this goes for both proletarian and capitalist.
Now on to what Socialism isn’t.
It is almost unavoidable that a discussion of ‘revolution’ enters this argument. In fact, I believe the idea of revolution is the central point of contention that divides all Socialists, modern and classical. There are three paradigms surrounding the question of revolution. The first that I will bring up and dismiss are those who avoid the question entirely. This is the camp of Socialists who champion today’s ‘European Socialism’ as the direction to go. By avoiding any revolution of fundamental social assumptions they liken Socialism to be a mostly political regulation of, in your words, ‘unfettered Capitalism.’ I guess this is OK, but it isn’t anything substantial enough to warrant serious discussion and it certainly falls short of the long philosophical history of the word, Socialism.
The other two camps accept revolution as an inseparable component of Socialism but have a drastic division over the specifics of revolution itself. One camp advocates a purely political revolution, the other a social revolution, or an awakening of the human consciousness, to use a more Marxian terminology.
The division is most visible historically in the division between the Mensheviks and the Bolsheviks in pre-Soviet Russia; the Bolsheviks being the advocates of political revolution, the Mensheviks, social.
It is the politically revolutionary Socialists that are responsible for the sour taste many experience at the mention of the word ‘Socialism,’ and rightly so. These are those who understand Socialist revolution in a top-down fashion. The specifics vary, but read State and Revolution by Lenin for the basics of how wrong this policy can go.
The idea that a small cadre of political elite can, or even will try to, enforce the social or productive emancipation of a nation (more on why the border here are problematic later), with or without the pre-requirements of Capitalist infrastructure is nonsensical and dangerous, as we are all very aware.
So now we are left with what I believe to be the correct understanding of revolution’s place in the consciousness of Socialism, social revolution. Marx often uses the terminology of an awakening of the collective human consciousness when touching on this, and so some mistake this as ancillary to the idea of a violent political revolution. I’ll admit his writing was sufficiently ambiguous on the virtues of violent political revolution. In some writing he makes the case that it is unnecessary in the most developed nations of his time, specifically England. In other writings he is visibly energized by violent movements in France; most notably, The Communist Manifesto. This ambiguity is in many ways responsible for the bastardization of Marxism by political revolutionaries that led Marx to declare, “I know nothing but that I am not a Marxist.”
This is where my core difficulty with a purely Marxist understanding of Socialism lies. In his earlier, more sociological and philosophical writings I think one finds a more appropriate, humane, and consistent notion of Socialism that is rooted in a social revolution, or an awakening if you’re a fan of fairy-tale terminology, that is encouraged by a certain level of productive development and that leads to a more thorough overhaul of society.
As far as what my prescription for right now would be, I have little. This is where the discussion of borders comes into play. My understanding of the desirable development of Socialism requires a world as developed (or at least much farther down that path) as the ‘developed’ nations have so-far achieved. The completion of social emancipation cannot be restrained by national identity and cannot occur without a developed Capitalist infrastructure. Those two requirements make it unavoidable that now is not the time. It is impatience on this fact that leads to the method of political revolution that is at the heart of how you can ‘end up with’ a Soviet Union. This is why in my original article I chose to leave my sickle hidden in the closet. The infrastructure of the world simply isn’t ready for what I have prescribed, and that should be apparent regardless of worldview on the matter. Given that, I advocate social programs, and the dismissal of stigmas attached to misunderstood philosophies in order to sooth the difficulties of a social structure built (necessarily) on competition and subjugation (albeit a much more honest and, perhaps, fairer, form of subjugation than in previous eras); as well as to encourage the development of egalitarian principles and continue to allow for the development of world-wide economic infrastructure.
In short, in practice I suppose I’m just a liberal. That was fairly anti-climatic…
One question and one comment:
Question: What does the governing or power structure of a post social-revolution Socialist society look like? Who will lead these newly emancipated people? And, more importantly, how will that person, or group avoid the cronyism that has plagued every other society?
Comment: It seems like the dissolution of national identities is one of the ingredients in your recipe for Socialism. I think a sense of tribal identity is deeply ingrained in the human psyche, and cannot be removed by social contracts. We as humans can only identify ourselves in the face of an “other”. This basic need for an “other” will always trump the logical social gains that might be had by dissolving tribal identities.
More later as I am busy today but:
“So for a catch phrase, Socialism, in its broadest sense, is the completion of the process of universal emancipation, extended beyond politics and into the productive facilities of mankind, this goes for both proletarian and capitalist.”
While this sounds wonderful you have to imagine what liberating the productive facilities of mankind would mean. Everyone produces only for themselves? What about groups working together to produce large or complex items? The individual producers would, I am assuming, own their means of production?
First you would have to convince me that there were socialistic elements that would serve us better than our current system. You would have to prove that the capitalist system of market based compensation was specifically broken in a way that large amounts of people were being systematically undercompensated while large numbers of people were overcompensated for the value of their production. Then based on these inequalities how would you apply elements of socialism to capitalist society without creating an inherently coercive system or violating individual liberties.
These are not unfamiliar questions, but that doesn’t make the answers less complicated or lengthy. I will address them but I am busy this week with a few rather important things and so I can’t say when I’ll get to them. Your second question especially is going to require me to go back to some dense economic works that I haven’t sifted through in years. So bear with me, I’ll answer in time.