Capitalism: The Real Thing and the Label

My own view on capitalism owes much to the work of Fernand Braudel, the French economic historian, and to his three-volume work, Civilization and Capitalism, particularly the second volume, titled The Wheels of Commerce. The rest is observation of the here and now.

Braudel’s presentation is overwhelmingly persuasive. Capitalism, as he sees it, is a distinct form of economic activity characterized by monopoly (whether clearly visible or not); alliances with political power to maintain control; detached from community, society, and peoples; and focused entirely on getting high returns on money. Therefore capital enters markets capable of being controlled, low in risk, high in returns—and then leaves such markets abruptly when conditions change. Braudel’s emphasis on monopoly, as a defining trait of the capitalist stance, means that capitalism is not entrepreneurial, does not believe in competition, and never mind free markets or the deification of The Market. Capitalists are never specialists.

The broader, more perennial, “always there,” unavoidable economic activity—of which, these days, “small business” is the supposed flag-bearer—is organically linked to community, society, and peoples. It is a necessity. Capital only deals with selected high-yield opportunities—and only while they last.

This form of detached, indifferent monopolistic exploitation of economic exchange, wherever it will work, became visible early in European economic history (Braudel’s subject) with money lending (“usury”) in the twelfth century. The mediaeval economy did not offer much in the way of opportunities; it was too organically structured, based on the interaction of “estates.” The opportunities arose when the first relatively small urban centers began appearing and therefore trade became more intense. Then capital becomes more visible in the form of the great merchants who traded in certain selected goods that fit their needs. Thus after money lending, call it banking, it appears in merchandising and distribution—but, pointedly, not in transportation. Why not? Transportation, as such, was not profitable and highly risky, especially transportation by water. It required high capital investments that had a short life and could be easily and unpredictably lost in a storm.

Capital briefly entered mining late in the fifteenth century—its first foray into actual production of anything at all. Capital left mining after about a 50-year participation. It wasn’t profitable enough. Sure enough, states took over the mines—because mining had become vital to the economies. Next capital selectively entered agriculture ranging from actual ownership of land and management of estates—but this only in a relatively small number of cases. Involvement with agriculture principally took the form of organizing acquisition and then sale and distribution of particularly profitable crops.

Eventually, as the industrial revolution dawned and as technology improved—not least the durability of what have since come to be known as “capital goods,” such as machines, capital entered the production sector as well and has, since, become almost synonymous with it. Its ways of thought have completely saturated, permeated economic thought and behavior—so much so that, these days, it appears to be a “truth from above” that corporations serve their stockholders—rather than the public. That management need not know the product deeply to manage enterprises; lower levels can handle that. That any legal way to save on taxes, thus to avoid contributing to the collective, is a virtue. Note, in this connection, my point above about “alliances with political power” that help the capitalist shape the laws. Therefore comes news today that Google has avoided paying $2 billion in taxes by moving $9.8 billion into a Bermuda shell company. Questioned about this, Eric Schmidt, Google’s Chairman, said: “I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate.  It’s called capitalism. We are proudly capitalistic. I’m not confused about this.” What we see here is “capitalism” as a label—a label of virtue. But its real meaning is detachment from community, society, and peoples. There is now another layer of people, above the ordinary masses. In that layer different rules apply.

Meanwhile—and Braudel largely concentrated on capitalism in the pre-industrial period—we may now be approaching another change. It may be that, as capital abandoned mining, so now it may be finding physical production less than suitable as a place to put its masses of money. There are clear signs of capital’s withdrawal in various places. Capital is still investing in virtual reality—along with using other people’s money to gamble on derivates—themselves quite virtual. And then, when oil runs out and once more capital goods became less durable, and people have less and less money to engage in consumption, we’ll all sink back into the good old Dark Ages. At last only usury will remain as an opportunity. And here’s hope that some strong church will erase that infamy too. For a while. For a while.

Honor, Capitalism

Asked to provide an antonym to the word capitalism, most web dictionaries return communism. Some instead suggest socialism; they don’t mention communism, probably because their editors think that communism is now dead as the Dodo. The word’s origins go back to (where else) late Latin, capitale, meaning property, from which we get such interesting secondary meanings as chattel and cattle. That capitale goes back to Latin caput, head. Do I infer correctly that it was the head man who had property, possessions…hence the word’s extensions? Caput is good. Reminds me of the German kaputt, meaning worn out, dead, and the phrase that goes with it: Alles ist kaputt! But (too bad) that word derives from a French card game, capot, meaning a bonnet.

Now with a word having deep roots like that, the tendency is to say that capitalism goes way back. But in the sense in which we use the word, it really harks back to Marx’s Das Kapital, thus the nineteenth century—and indeed Marx’s success in seeding communism, hence the antonym. The fervent embrace of capitalism by a subset of Americans must have its roots in this modern ideological form of it, arising from the blessed Now, Today—thus signifying a kind of loss of tradition, historical sense, a lack of depth, indeed a lack of thought.

Cartoonists retain the distinctions. Capitalists are always pictured as extraordinarily fat, oppressive, and wearing tall hats. The blessed chattel-cattle are drawn as emaciated, thin, threadbare and groaning under enormous burdens.

George Orwell, to whom we owe so many things, failed us in one regard. He gave us Ignorance is Strength, Freedom is Slavery, War is Peace—but he failed to mention Capitalism is Honor. It was in the post-1984 period that we’ve had to invent the phrase and introduce it, and try to teach it to the chattel in popular cable talk intended to suggest that if you work for capital, subject to release at any time, you are a capitalist.

Interesting contrast there. Honor and Capitalism. I suggest it to the thoughtful as a subject of meditation on those long, boring commutes. The modern mind (my impression) feels a kind of mild but sad nostalgia when contemplating Honor—as something that harks back to childhood, the olden days, the days that (really) never actually held sway. Capitalism (my impression once again) has a not quite pleasant taste but signals power, smarts, sophistication, and a kind of realistic indifference to anything but self—but, Facebook Friend, it has a kind of scientific magic, doesn’t it? That very sophistication, that realism, that hard-nosed drive, baby, that’s what magically transmutes—doesn’t it?—into the American Dream?

The truth is (my conviction) that in a genuinely healthy society, one that must confront reality—and the time for that is now approaching—honor will turn out to be the actual antonym to capitalism. It means, at minimum, returning to comprehensive human values: cultivating character, loving our neighbors not keeping up with them, doing unto others as we would be done by, honoring our parents rather than fawning before the powerful, the celebrated, honest dealings, defense of our shores not of “interests,” firm handshakes, straight talk, aiding the weak, visiting the sick, and building foundations before raising structures—never mind Towers of Babel.

Feudal and Capitalist Economies

Early last year I wrote about “Types of Economies” (here) and contrasted what I called “marketshare economies” and “capitalist economies.” I characterized the first as “feudal” because it tends on the whole to optimize in favor of large “tribal” aggregates, communities—and the other as “detached from the community.” I use the word marketshare because any economy organized to secure and hold share in a market, very often at the cost of foregoing maximal profitability, tends on the whole to benefit its stakeholders—its employees and its suppliers. Marketshare economies aim at control and stability. Capitalist economies aim at maximum profit; they enter and leave markets based on gains to be realized, not to produce values in the long run.

I come back to this subject today thanks to Monique Magee’s nice hat tip. She sent me a link to a chart published initially by Deutsche Bank (here) and republished by Clusterstocks. It shows in striking overlay the performance of two different economies during two different recessions. The first is Japan’s which I’ve always considered to be the “good” kind; and the other one is ours, which I’ve viewed as the “defective” kind. My favorite scholar on this subject, the Frenchman Fernand Braudel, spends three volumes (see reference above) on showing that the word “capitalism,” strictly speaking, should only be applied to the “defective” kind of economic organization of the world. But let’s move on to the chart. A comment then follows.

Ignore, for a moment, Deutsche Bank’s laudatory characterization of the American economy above the chart. This graphic shows the unemployment rate, hence we can also view it through the eyes of the laboring masses—the members of the wider community. The years for Japan extend from 1989 through 1995; the years plotted for the United States are for 2006 through 2010. The recessionary period in both is marked by the grey bars. Now here is a striking snapshot of the two kinds of economies I have in mind. In one the culture powerfully motivates the economic sector to maintain jobs and thus to serve the entire community. In the other the unemployment rate is much higher to begin with, and at the first sign of a turn-down, it sheds jobs without, seemingly, even thinking about alternatives.

It’s the culture, stupid, as I keep repeating monotonously…

The Worship of Man

I return today to two of my early teachers, two cyclic historians, Toynbee and Sorokin. They observed astutely that when humanity abandons its transcendental focus (God, the universe, and everything) the object of human worship becomes humanity itself. Both of these men would have emphasized the word collective, as in “collective humanity.” Collective humanity needs a focus, as it were. Great secular ages sooner or later become imperial, and figures like pharaohs and emperors then emerge as handy symbols of secular worship. Hence, of course, conflicts flared up in late Roman times when Christians chose not to toss a bit of incense on the glowing coals in gestures of submission to the prevailing ideology.

What neither of these sages noted is the highly innovative character of American culture, and here, therefore, I hasten to provide a footnote to their wisdom. Our culture has discovered a wonderful new way of worshipping man. It arises from the insight that humanity may be worshipped in either of two ways: as a collective, which turns our transcendental longing into the worship of the state—or as an individual.

Now it turns out that capitalism is wonderfully suited as an all-purpose institutional structure for the worship of man as an individual. Back in the God-fearing days capitalism was condemned—to be sure under another name, usury. But functionally that label was correct. Later, as we began to hear only the “melancholy, long, withdrawing roar” of the sea of faith, capitalism was reluctantly accepted as a device and instrument for social benefit, as in creating jobs, railroads, pipelines, trickle-down wealth, and the like. Now, finally, as the Individual starts to be capitalized, we are beginning to raise Capitalism itself to the status of a religion—as earlier we raised Communism to the same exalted status. But Communism was a foreign god, and we now praise Us for having managed to conquer it.

What tea leaves am I reading to reach these conclusions? Well, those left over after each gathering of the Tea Party. Those marked by the elevation of figures like Rand Paul. And by news, such as today’s, about “for-profit colleges.” For-profit prisons, for-profit hospitals, for-profit politicians. “I wonder,” Brigitte asked as we were chuckling over these matters over coffee. “Are there for-profit churches yet?” — “Yes,” I said. “The great mega churches with TV channels of their own. But they are legally not-for-profit. And rightly so. It would be sinful for them to pay taxes to the great evil one, the Collective Human of the State.”