Sunday, August 16, 2009

A Brief History of Capitalism

I have lately come to realize that capitalism has been collapsing virtually since its birth. That's because the main premise of capitalism, which is that in order to succeed every human being must take out more from our economic system than he or she puts into it (i.e. earn a profit) is flawed at its very core.

In nature, all living systems are created such that wholes must always be greater than the sum of their parts. This is particularly true if they hope to be self-sustaining. A system in which the whole is perennially bled dry for the benefit of a few individuals cannot sustain itself indefinitely. It must continually draw in new energy from new sources if it hopes to rejuvenate itself. Capitalism, with its for-profit formula, is therefore the opposite of a self-sustaining system. If everyone puts in X and tries to take out X + 1 (or X + 12, 15 or 3000!) we can never evolve into a system that works for everyone, because there can never be enough to go around. History supports this; so we must learn from our past so we're equipped to shift our system into something intentionally supportive rather than unwittingly exploitive of life.

Capitalism emerged to replace an ancient, agrarian form of economics that depended on class privilege by dividing people into nobility (the haves) and serfs (the have-nots.) The birth of a merchant middle class appeared to be a good thing, because by exchanging creativity through barter, people were able to lift themselves out of the endless cycle of poverty that had been caused by those "birthright" systems.

The problem with capitalism, however, was that the invention of paper money to facilitate barter generated the added incentive to extract more money from each other than was fair, setting up win-lose exchanges rather than win-win exchanges. Once we notice that the makers of products (labor) have only their wages, less taxes, to purchase the very same products they've just produced at their now marked-up for profit prices, we realize the labor force in its totality will never have enough cash to purchase all the products available for sale in their totality without constantly borrowing cash to keep them afloat. If laborer and consumer are one and the same, how can labor EVER afford to consume what it makes AND pay a profit to business, using only its own wages as its means?

Slavery and colonialism supported capitalism during the 1800's by enabling wealthy merchants to exploit cheap labor and ship foreign goods backto Europe, where enough money already existed to buy them. The end of both colonialism and slavery however, led to shortages and poverty in Europe. Poverty triggered social unrest and revolution abroad, and eventually led us into WWI. The various national war machines and their ensuing national debts created massive cash infusions for the various economies that jump-started capitalism for a time, culminating once again in the concentrated prosperity we observed in the Roaring 20's. That was followed by the Great Depression because wealth concentration led to massive poverty in the U.S. WWII and its federal debts conveniently eased us through the depression era, though at a terrible price.

The 50's were again a time of general prosperity as the U.S. reaped the benefits of all the added technology and industry generated by WWII, and Europe reaped the benefits of rebuilding its shattered cities and infrastructures. When family budgets once again began to grow strained toward the end of that happy decade, we abruptly inserted women en mass into the workplace. Suddenly families could sell 80 hours a week instead of 40! That new spurt of family prosperity held for a time, until prices caught up to the rise in wages by the late '70's, which is when foreign competition came knocking at our door and "stagflation" became a household word. Cheaper wages overseas meant cheaper products competing with US goods. We couldn't afford to buy what we were making here anymore, but we could still afford to buy what less developed countries were producing for our sake.

U.S. companies then made a huge push for labor productivity gains, which meant people had to do more in less time so our price per unit could fall to match those of overseas competitors. Unfortunately for us, our technological improvements could be imitated by our overseas competitors, so our ability to improve our productivity wasn't enough to hold our competitive edge over their consistently lower wages. Since we couldn't beat them at the lower price game, the '90's and 2000's brought a period of increased foreign exploitation as we began to ship US jobs overseas to those same low wage workers. Meanwhile, Americans lost buying power when we lost the ability to negotiate living wages from companies that needed to earn a profit more than they needed to support their local labor force. (That business seems to have forgotten that labor and consumer are one and the same is the delicious irony of that decision.)

What happened next was predictable. Debt skyrocketed as Americans were induced to continue to consume ever more, even as their buying power plunged and their jobs disappeared overseas. When we ran out of room on our credit cards and out of equity in our homes, the banks belatedly discovered they could no longer squeeze us for profits on that debt and the whole mess began to unravel. Our government then wound up inserting a massive amount of cash into the banking system to support the debt crash and burn that was triggered by our loss of buying power, to ensure people could continue to borrow more and continue to consume - never mind that no one can pay any of it back! (Don't even get me started on the corruptive influence of inflation, because that's a whole different blog for another day.)

Sooner or later we're going to run out of new people to exploit, new hours to sell and new sources of money with which to save a totally flawed system that deserves to fail. It deserves to fail because it is designed - however unintentionally - to endlessly exploit human life for the sake of money, rather than support all life for the sake of love and joy.

1 comment:

  1. I believe that many of us have come to look upon our current economic system as an “end game” – capitalism as an economic nirvana, as the pearly gates of cultural heaven. It’s no different than the way we look at democracy. Let's assume its perfection without any attempt to view or challenge the flaws; let’s move along, preferably to one store or another, to buy something on credit. Don’t question the system, simply indulge.

    This reminds me (a brief aside) of one of the most idiotic phrases of the 70’s: America. Love It Or Leave It. The phrase smacked of the worst kind of mindless government propaganda – blurring that line between questioning authority and treason. (America wasn’t the problem; politicians were the problem. But the problem had a slick marketing campaign.)

    The same empty rhetoric can be applied (with the same officious wink and nudge) to our current economic system. Capitalism. Love It or Leave It. A good many wealthy people are telling us not to worry, because it’s “perfect.” If I’m behind on my mortgage, maxed out on credit, somehow it must be my fault. I’ve somehow abused the system that oh-so-loves-me. (Sorry, I can hear my own cynical pipes hissing dangerously.)

    But I suspect economic systems (and governments) are like blood clots. They work in a pinch when necessary, but they’re not a forever cure. The real life’s blood of any nation’s infrastructure is the ability to flow and change and adapt to whatever new stimuli, to new challenges and conditions. No system, micro or macro, can sustain itself in stasis.

    And yet we’re so damn persistent in maintaining our traditions and current ideologies that we can’t see past our own blindly patriotic rhetoric. Are we a great country? Yeah, I think so, but again, what a shame to confuse patriotism with our inability to break ourselves free from 18th and 19th century morals. I mean what a pity, if a future world looks back on America, 100 or 200 years hence, and decides that our excess and our greed and our tendency to either wage or fund wars was our epitaph. Because capitalism has a way of trouncing blithely over those who’ve fallen (usually penniless) in its path. If you don’t believe so, just look at any corporate charter. America’s corporate structure has become our Frankenstein.

    I’m not saying capitalism’s a horrid notion, but I do think it’s time for capitalism 2.0. Capitalism with a socialist (oops, dirty word) chaser. Capitalism fused with altruism. In other words, it’s time for something newer. I really don’t see capitalism as humanity’s end game, simply the means to an end – or rather the means to another means to another means more adaptable to the changing needs of we, the peasants. Hopefully, the end games still far out of sight.

    I will disagree with Eileen on one point: that a problem with capitalism is money. While I agree that our current system is a form of debt (and what a silly concept, debt) I also see currency as a useful tool when one isn’t carrying two chickens in ones pocket to exchange for a mule. (Money’s not the problem here, it’s the lust of money. The addiction.) Wealth (by itself) serves no purpose. A billion dollars in my bank account, sitting there collecting interest, is pretty useless to either me or the world.

    However, I suspect it’s also time to jettison the abundance. The over indulgent tendencies that cling to capitalism like a rash. For too long we’ve deemed “abundance” our God given right to own everything in sight, no matter how many credit limits we extend to pay.

    I have a theory; if each family in America were to give up (voluntarily, mind you) 10% of its wealth over a span of, say, 10 years, we’d hardly miss the excess. Our children and our children’s children, if following suit, would eventually reach a sustainable level. Manufactures, producers and retailers could gradually cut the superfluous. Fifty pairs of jeans instead of 100? Eighty breakfast cereals instead of 130? By then, I doubt we’d even notice the difference.