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…