Musings on teh Question "What Kind of Capitalism?", September 5, 2010

Even to frame the question this way assumes a strange conclusion: that "capitalism", an abstraction in any event, is an end in itself. It's not. It's a system we put in place to achieve other goals.

So why not look at what our goals are in creating an economic system first, then design the system to achieve them. We'd probably want to maximize overall wealth, ensuring both an adequate incentive to produce useful goods and a relatively wide distribution of the value produced (both as an end in itself and to produce an active economy); certainly we wouldn't set out to produce concentrations of wealth, especially given the political and market distortions that would quickly produce. We'd probably want to retain a market structure, to save the transaction costs and inefficiencies associated with administering a large economy, but only to the extent necessary for efficiency, not as levers to concentrate power or to create "winner take all" outcomes.

Moreover, our economic structure is only about producing wealth, but other values are of equal or greater importance: family, freedom of expression and conscience, opportunity to pursue meaningful work, etc. So we'd only use the economic system we put in place so far as necessary to support our lives, not as the ultimate end of our lives.

In short, we'd define and use markets to serve our ends, not vice versa.

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Suppose you're an owner of some capital, and you just paid your employees $500 to make products worth $1000. A bit of a dilemma if you'd like to pocket the difference, but you're relying on them to buy your product. One possibility might be to get your friends in government to lean on some foreign countries to open their markets on favorable terms (to you, obviously). There might be the occasional spat with local insurrectionists, and/or a world war or two as you bump up against other great powers looking to do the same thing, but hey, that could be an opportunity for more profits! Or you could produce a sort of phony credit based economy where they don't really have any money, they just hock their futures to pay for your surplus.

Gosh, that sounds grim after all. Good thing we here in the US would never do anything like that!

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"Trickle down" involves the (utterly risible) idea that giving money to people who aren't liquidity constrained to begin with will create stimulative economic activity (i.e., demand in conditions of excess capacity).

The picture is a tad different when you're talking about workers.

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It's astonishing how often people say that unions serve no current purpose. I'm often tempted to (and do) ask: "So the whole wages and benefits thing is over, then?"

Unfortunately, since we pulled down trade barriers, manufacturing employers will have their throats cut by domestic and foreign competitors if they decline to relocate to jurisdictions where the labor protections are weaker or non existent, meaning that not only do we need to strengthen unions here, but to avoid a race to the bottom we need to do so abroad, and (at a minimum) condition trade deals on reasonable labor protections.

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Most European countries (where social protections are more fulsome then in the US) also have greater social mobility than the US does.

http://www­.oecd.org/­document/5­1/0,3343,en_2

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Regarding Christianity:

All who believed were together and had all things in common; / they would sell their possessions and goods and distribute the proceeds to all, as any had need. / Day by day, as they spent much time together in the temple, they broke bread at home and ate their food with glad and generous hearts, / praising God and having the goodwill of all the people." (Acts 2:43-47)

 

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Certainly we have faced significant competition from post reconstruction EU. And in fact they have done this in the context of both a more fulsome social safety net and rates of taxation, both corporate and individual, that are much higher as a percentage of GDP than here in the US.