Category Archives: Capitalism and Marxism

Lorenzo and Marxism

This is in response to Lorenzo’s comment here concerning Marxism:

In a smaller economic system, relatively speaking more closed system, the socially necessary abstract labor time would be more closely aligned with the crude labor time. Value in a barter system would be argued between folks that were more intimately acquainted with the effort it took to create the products. If the crude labor value and the socially necessary abstract labor diverged widely then the ‘bid’ and ‘ask’ values would not create a market. To the degree that they converge is to the degree that a market is made. In capitalism where a third party is typically assumed and the ‘value’ of capital (of money) has varying degrees of severance from the crude labor required to make the product, a sort of free floating uncertainty about the variation between crude labor and socially necessary abstract labor time certainly opens the door for exploitation where value is not ever realized by the laborers, the means of production or even more, the owners of production assuming they are not the laborers. For example, the transformation of value from a house to a mortgage to mortgage backed securities to credit default swaps represent multiple opportunities for values to be reassessed, sliced and diced, to the point where the market can actually be thoroughly confused about who owns what underlying asset (or what percentage of the underlying asset). When this much flexibility is driven by market mechanisms, there is every opportunity for exploitation. Even more so, a good capitalist would not be worth their salt if they could not find a way to exploit the uncertainty in this system of value.

The Free Market: Capitalism and Socialism

Adam Smith, an Enlightenment thinker, thought of humans as fundamentally self-interested as contrasted to Thomas Hobbes.  Hobbes thought that selfishness worked as a kind of glue for society.  His idea was that people are selfish; fundamentally concerned only with themselves.  This meant that each person wanted to thrive based on their personal wants and needs without regard to ideals like the greater good or the plight of others.  However, as selfish people, they want security at any cost.  In order to obtain security, people subject themselves to the state, to laws.  While individuals would freely rape, murder and plunder without concerns of conscience they do not because they do not want to be on the receiving end of their brutish desires.  The free subjugation of themselves to the state is called ‘social contract’ theory.

Adam Smith lived hundreds of years after Hobbes.  He was also a social contract theorist.  He was concerned with how self-interested individuals create commerce.  In “The Wealth of Nations”, Smith writes:

“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”[1]

He thought that when self-interested individuals compete, the process of competition resulted in the most optimum allocation of resources because competition resulted in the lowest average cost of goods or services.  In this way, he thought that self-interest served the greater good.  He thought that any time the government or monopolies intervened in this process it prevented the process from working as it should and kept costs artificially higher thus interrupting the normative operation of a free market.  It is important to note that Adam Smith’s ideals of the free market only work on the basis of competing individuals not market monopolizing corporations or governments.  Market monopolies interfere with competition and defy the ideal of a free market.

“The price of monopoly is upon every occasion the highest that can be got. The natural price, or the price of free competition, on the contrary, is the lowest which can be taken, not upon every occasion indeed, but for any considerable time together. The one is…the highest which can be squeezed out of the buyers…The other is the lowest which the sellers can commonly afford to take…. The monopoly price is most often sustained by “the exclusive privileges of corporations (65)”[2]

“Smith uses the terms “self-interest” and “private interests” always in opposite ways. For former, his most famous statements are “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest (20),” and, “by directing [his] industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention (351)”. Concerning “private interests,” Smith is not so sanguine; these private interests constitute the “spirit of monopoly (371)” which Smith so much detests. It should be clear by now, from what has been said before, that Smith is well aware of the dangers of avarice and especially so since the interests of capitalists diverge, in Smith’s view, so much from the interests of the general public.”[3]

Capitalism (a term he never uses), as Adam Smith thought, is depended on private property and private ownership.  The self-interested individual had complete legal and sole rights to their property.  Without private property there would be no motivation for individuals to compete and increase their property ownership, their wealth.

Socialism believes that individual interests are served better when they cooperate with each other and not compete.  Socialism believes in social ownership.  In effect, this means workers own production (also called the means of production).  Production is not owned privately but by a group.  There are many forms of socialism.  Some forms of socialism believe that the workers in a factory own the factory, but everything else in the economy is ‘free market’ and private property.  There is no government ownership is this type of socialism.  Some forms of socialism simply pay a social dividend based on factory profitability.  Some forms of socialism nationalize factories but still maintain private ownership.  Social democrats use a progressive tax system and government regulation within a private market economy.  There are also anarchist and libertarian forms of socialism.  Socialists tend to believe that when the individual is elevated above the group, normal human interaction and group identities tend to get ignored.  Language[4] is a perfect example of how humans are fundamentally collective.  People do not have ‘private languages’.  Communication is only possible by sharing a language that we individually did not make up.  People are not hermits.  We form governments, churches and social communities. 

“As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce. The wood of the forest, the grass of the field, and all the natural fruits of the earth, which, when land was in common, cost the laborer only the trouble of gathering them, come, even to him, to have an additional price fixed upon them. He must then pay for the license to gather them; and must give up to the landlord a portion of what his labor either collects or produces. This portion, or, what comes to the same thing, the price of this portion, constitutes the rent of land, and in the price of the greater part of commodities makes a third component part.

The real value of all the different component parts of price, it must be observed, is measured by the quantity of labor which they can, each of them, purchase or command. Labor measures the value not only of that part of price which resolves itself into labor, but of that which resolves itself into rent, and of that which resolves itself into profit.”[5]  -Adam Smith

It is important to note that a ‘pure’ socialism or capitalism has never existed on any large scale.  Every world historical economy has always been a mixture.  For example, consider the notion of rent in capitalism.

“For the purposes of economics, Smith divides society into three economic classes: the landlords, the laborers, and the merchants and manufacturers (448), or those who live by rent, those who live by wages, and those who live by profit (217). Now the interests of the first two classes are tied to the prosperity of the nation; economic expansion raises the value of land and increases the demand for labor and hence its wages. But exactly the opposite is the case with the third class, those who live by profit:

But the rate of profit does not, like rent and wages, rise with prosperity, and fall with the declension of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin. The interest of this third order, therefore, has not the same connection with the general interest of the society as that of the other two (219).

Thus the interests of the third class run contrary to the interests of the other two; expansion actually raises the cost of labor and rent and increases competition, thereby lowering profits, so much so that the ruination of a country is actually in the best interests of the third class”[6]

It is interesting to note here that economic expansion “raises the value of land” but it is uncertain how long the values of land can go higher and how exactly the profits increase unless the property owner is the sole owner, i.e., already paid for and not obtained by a loan.  It would seem that profit is “high in poor countries”.  Adam Smith takes this an indicator of “ruination of a country”.

A property owner allows a tenant to live in their property for a fee.  The renter does not own the property and if the renter quits paying rent they are not allowed to live in the house.  Likewise, a mortgage is ‘ownership’ on paper but the bank allows a mortgagee to live in the house as long as the mortgage is paid.  In both cases, ownership is not sole or absolute – it is contingent on paying a periodic fee.  So, the landlord or the bank cooperates with the individual in the interest of capitalizing on the financial arrangement.  It should also be noted that the bank and the landlord are likely to be indebted themselves to the third class, “those who live by profit”; the financiers, that Adam Smith writes of above.  

We can see that the renter or the mortgagee is not a property owner in Adam Smith’s notion of property ownership.  However, the aspiration of the renter or mortgagee is for property ownership.  Since the aspiration of sole ownership is not reality, a group arrangement is made that allows an individual to have shelter until their aspirations can be obtained.  However, it is certainly true that most individuals today will never own their house outright.  Therefore, in reality they will live their whole lives working and cooperating in group economic, arrangements. 

In finance, leverage is the ability of an investor to increase their ‘paper’ holdings based on loans.  Again, a group economic arrangement allows investors to obtain securities that they would normally not be able to afford.  As such, the investor is obligated to a group, cooperative arrangement to leverage their holdings. The question of fees and profit is actually an ancient issue.  The Bible explicitly forbids interest or profit on loans (Exodus 22:25–27, Leviticus 25:36–37 and Deuteronomy 23:20–21).  These passages state that interest is exploitative.  In this sense, those that base their faith on these books would be in perfect agreement with the writings of Karl Marx (at least on this specific topic) and Adam Smith. Exploitation with higher and higher fees for loans on rental and mortgaged property are examples of how the wealthy class, the real property owners, has increased their wealth at the expense of those that are not wealthy.  This exploitation has been going on from the beginning.  Even Adam Smith recognized the exploitation of labor.  This excerpt is from an essay on The Wealth of Nations:

“However, in the negotiation of wages, the worker is at a distinct disadvantage. In the first place, the law prevented him from joining with his follows to bargain (71, 151). Further, the law always favors the masters over the workers (151). Workers are prevented from joining in unions to raise wages, but the masters are not forbidden to unite to lower them; indeed, the law encourages them to do so. This legal inequality particularly angered Smith, who noted that, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices (137).” But when the workers attempt to meet, it “generally end[s] in nothing, but the punishment or ruin of the ringleaders (71).” The inequality is so great that:

Whenever the legislature attempts to regulate the differences between masters and their workmen, its counselors are always the masters. When the regulation, therefore, is in favor of the workmen, it is always just and equitable; but it is sometimes otherwise when in favor of the masters (151).”[7] –Adam Smith

Socialism also recognizes the tendency for exploitation of the worker and tries to address it.

In both socialism and capitalism dues must be paid to benefit.  For Christianity[8], capitalism and socialism[9] a main tenant is “He who does not work shall not eat”.  Paying your dues is not an option in socialism or in capitalism.  Fees are required to participate in the group.  The main difference is that in capitalism, according to the ‘theory’ of Adam Smith, individualism as self-interest reigns supreme.  The ideal is that the individual worker benefits with private property ownership not the financier.  In socialism, the individual worker benefits as well but socialists want to formally recognize ownership of production in a group context – the laborer not the financier.  Depending on the type of socialism, the group could mean anything from share holders in a factory to nationalism of a factory.  In theory, the individual should benefit in both systems.  However, socialism wants to take precautions to ensure that the group of laborers benefit and capitalism viz. Adam Smith acknowledges that in some cases the financiers will benefit at the cost of the laborers.  Both systems distribute wealth in one way or another.  The fundamental problem that Marx wanted to address with socialism was how the wealthy, the financiers, ended up with all the real private property ownership while the workers, in effect, ended up as indentured slaves barely able to pay their bills.  Additionally, in both systems classes are set up in practice.

Karl Marx, the founder of communism, thought there was a higher and lower form of communism[10].  Engels and Lenin called the lower form of communism, socialism.  Socialism is not egalitarian.  Egalitarianism means everything is shared equally.  Marx described socialism like this:

“But one man is superior to another physically or mentally, and so supplies more labor in the same time, or can labor for a longer time; and labor, to serve as a measure, must be defined by its duration or intensity, otherwise it ceases to be a standard of measurement. This equal right is an unequal right for unequal labor. It recognizes no class differences, because everyone is only a worker like everyone else; but it tacitly recognizes unequal individual endowment and thus productive capacity as natural privileges. It is therefore a right of inequality, in its content, like every right. Right by its very nature can consist only in the application of an equal standard; but unequal individuals (and they would not be different individuals if they were not unequal) are measurable only by an equal standard insofar as they are brought under an equal point of view, are taken from one definite side only, for instance, in the present case, are regarded only as workers and nothing more is seen in them, everything else being ignored. Further, one worker is married, another not; one has more children than another, and so on and so forth. Thus, with an equal performance of labor, and hence an equal share in the social consumption fund, one will in fact receive more than another, one will be richer than another, and so on. To avoid all these defects, right instead of being equal would have to be unequal.”[11]

Karl Marx thought that communism would eventually replace socialism not by force but by natural progression.  Communism is egalitarian.  Communism thinks that wealth should be distributed equally among equals.  Individuals should not be singled out according to class, wealth, natural abilities, etc. but should work cooperatively for the greater good of society.  Communism does not believe in private property.  Private ownership and competition is thought to favor the rich and; necessarily, put less wealthy individuals at a competitive disadvantage.  Private property is what gives rise to a class stratified society.  In communism the ideal is one of egalitarianism; that all people are equal and should receive the benefit of their labor equally. 

For communism, individual ownership is not allowed but that does not restrain class stratification.  The administrators of shared wealth, the government, become the de facto upper class.  Wealth gets disproportionately distributed according to this class structure in communism as well.  In practice, capitalism, socialism and communism cannot claim a classless society nor can they claim that the individual is the sole beneficiary of the toil of their labor as property owners.

What follows from this is that the group or the individual is not normative for these economies but ideals.  Class is inevitable for capitalism, socialism and communism – it is utopic to think otherwise.  A class is a group comprised of individuals.  Mitt Romney is part of a class, a wealthy class.  Most of us will realistically never be in his class.  However, humans are aspirational – being human is being towards a future.  In this way capitalism offers the promise of a possibility – the possibility for success, the chance to be in the wealthy class.  For those that extol the virtues of capitalism, it does not seem to matter as much that the vast majority of these aspirations will never be fulfilled.  What matters is the place for the dream, the drama of the ideal.  As individuals, we need aspiration just after the need for food and shelter.  We need to think we are or will be a part of the wealthy class.  The goal of this aspiration is for membership in a group, a communal hope shared in capitalism.  We are ready to use our collective language, our economic group arrangements, our families, societies and affiliations to aid us in our goals – the envisioned absolute wealth of our freedom.  The dream that imagines itself as self-interested individualism is all the while prefaced, perforated and dependent on the other, the group, the community – our shared language.  This is what socialism recognized and tried to articulate in its economics.  What communism lost was the aspirational; the value we place on the desire for moving towards a future.

In reality, there never is an isolated individual that can cleanly be separated from a collectivity.  Additionally, the dream of accumulating more and more sole property ownership based on the system of self-interested individuals appears to reach practical limits as a result of the third group Adam Smith writes of, the financiers.  None of us are hermits and make up private languages as we go through our daily lives.  The notion of an Adam Smith styled individualism is what many philosophers think of as metaphysical (meta-phusis as beyond physics or beyond the physical).  The aspiration I have referred to is desire for the metaphysical individual.  It does not reflect our lived reality but necessarily participates in our sense of meaning and hope as an ideal.  Aspiration is essential for meaning.  To aspire is to see beyond the hum drum, the daily grind and meaningless repetition – perchance to dream.  How does the state, the government, figure into our aspirations?

For Adam Smith the state is the guarantor of our security.  It is responsible for the military.  It also is responsible for enforcing the law.  It holds the promise of reprisal for violations of law.   It is also responsible for public works projects and certain public institutions where profit is not possible.

“According to the system of natural liberty, the sovereign [government] has only three duties to attend to; three duties of great importance, indeed, but plain and intelligible to common understanding: first the duty of protecting the society from the violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and, thirdly, the duty of erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit could never repay the expense to any individual or small number of individuals, though it may frequently do much more than repay it to a great society.”[12]

Contrary to popular belief, Adam Smith was not opposed to government regulation.  He spent 100 pages in the “Wealth of Nations” discussing banking regulations.  As has already been mentioned he knew the financiers in a society had a corrosive effect on society.  They had a tendency for exploitation and government regulation was needed to hold them in check.

For Adam Smith, self-interest is good for those that live by ‘rent’ and ‘wages’ but not for those that live by ‘profit’ as previously mentioned.  Smith thought those that live by profit had a destructive influence on society.  This is why Smith favored regulations for those who live by profit.  The government certainly plays an essential role for ensuring a fair market.  Of course, he recognized the issues with capricious regulations and the way they interfered with the normal market operation of efficient competition.  However, he would have never given financiers carte blanch, deregulated access to the market.  Adam Smith would have said, “I told you so” when the Gramm–Leach–Bliley Act of 1999, deregulated financial services.   It repealed part of the Glass-Steagall Act of 1933 that prohibited a single institution like a bank from acting as any combination of an investment bank, a commercial bank, and an insurance company. Basically, the repeal allowed banks to use customer deposits for risky financial ventures.  It also allowed banks to have conflicts of interest by ‘advising’ its customers to use its financial services and products without regard to more competitive and valuable investments.  Additionally, the government was implicated in these risky investments as the Federal Deposit Insurance Corporation (FDIC) backed up customer deposits.  The Dodd–Frank Wall Street Reform and Consumer Protection Act tried to restore financial oversight of banks and financial institutions and consumer protections.  One thing it did was to allow the government to liquidate these institutions that are covered by the FDIC in order to keep these institutions from having large scale failures that would jeopardize the ability of the U.S. government to bail them out.  Regulations not only provide a fair market but also protect the government from bankrupting itself from market excesses.  Adam Smith would have understood the need for this and would not be calling for deregulation as modern Republicans have been doing.

The issue here is that when individual self-interest promotes the healthy working of the market place then the government should stay of the way.  However, the government exists to make sure it protects “every member of society from the injustice or oppression of every other member of it”.  While it may be in the interest of oil companies to “drill baby drill” it may not be in the interest of the environment and therefore, other members of society to let them do it merely to increase their profits.  The government’s job is to make sure the market protects other members of society whose self-interest may be damaged by one group’s profit incentive in the market.

Adam Smith even recognized that the ‘free market’ was not a panacea that could solve all social ills.  He stated that a primary function of government was to take care of public works and public institutions where the “profit could never repay the expense” of doing the project.  It is certainly arguable that health care insurance providers and education could come under this rubric.  It is not the profit interest of health care insurance providers to cover certain risky population groups or chronic illnesses.  In order to maximize their profits it is in their interest to ‘cherry pick’ their clientele and drop clients that are a drain on the system.  It would be hard to believe that anyone could seriously argue that health care insurance providers have not had quite a long history that illustrates this point.  Additionally, while a very good private education is certainly feasible, the cost would prohibit many classes of society from being able to obtain an education.  Education for a profit certainly works for those that can pay but simply ignoring the others that cannot pay is not in the long term interest of a society.  Adam Smith argued that education is a public work when he we wrote:

 “The same thing may be said of the gross ignorance and stupidity which, in a civilized society, seem so frequently to benumb the understandings of all the inferior ranks of people. A man without the proper use of the intellectual faculties of a man, is, if possible, more contemptible than even a coward, and seems to be mutilated and deformed in a still more essential part of the character of human nature. Though the state was to derive no advantage from the instruction of the inferior ranks of people, it would still deserve its attention that they should not be altogether uninstructed. The state, however, derives no inconsiderable advantage from their instruction. The more they are instructed the less liable they are to the delusions of enthusiasm and superstition, which, among ignorant nations, frequently occasion the most dreadful disorders. An instructed and intelligent people, besides, are always more decent and orderly than an ignorant and stupid one. They feel themselves, each individually, more respectable and more likely to obtain the respect of their lawful superiors, and they are therefore more disposed to respect those superiors. They are more disposed to examine, and more capable of seeing through, the interested complaints of faction and sedition, and they are, upon that account, less apt to be misled into any wanton or unnecessary opposition to the measures of government. In free countries, where the safety of government depends very much upon the favorable judgment which the people may form of its conduct, it must surely be of the highest importance that they should not be disposed to judge rashly or capriciously concerning it.”[13]

While this may seem to promote a certain kind of equality, it is really “the duty of erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual or small number of individuals, to erect and maintain”.

The government is not a cancerous growth of society but just as essential as referees and rules are to games of sport.  Getting rid of government is cutting off your nose to spite your face.  It ignores the need for a market framework where fairness and protections are ensured.  It should restrain monopolies and market bubbles that would cause cost to be “the highest which can be squeezed out of the buyers”.  It is also responsible for filling in gaps that self-interest and profit cannot address.  Karl Marx and Adam Smith both addressed the inherent exploitation built into an economy.  Protecting individuals from economic exploitation is vital for an economy as socialism and Adam Smith understood.  Karl Marx went further with trying to embody elements of protections for ‘self-interested’ individuals into an economy.  Adam Smith understood the human need for aspiration, the need to dream, and tried to embody this in the economy of capitalism.

What is dreamed must pertain to me and not to an abstraction about the state or egalitarianism.  An ‘aspiration of the state’ is too abstract from the self-interested point of view.  However, the abstract notion of an ‘aspiration for the state’ is not inconsequential – it is the aim of morality or what Adam Smith termed sympathy[14] (more like what we think of as empathy).  Morality aims at egalitarianism in that it places oneself in the place of the other for Adam Smith.

“However selfish man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though they derive nothing from it except the pleasure of seeing it.”[15]

When I refer to morality, I am speaking specifically about the natural empathy that many people have for the suffering of others.  There are very few people that proclaim outright that if you do not work just go ahead and starve to death.  For most of us, we may think that those who do not work will not eat but few are willing to let children, elderly, handicapped or even lazy people die before our eyes.  The same holds true for health care.  We do not want to pay for others health care but the idea of just letting people die without it is abhorrent.  This is why we are willing to pay more for emergency room health care than to address the issues systemically and at a lower cost.  Most of us will not overtly proclaim that if you do not have health insurance go off somewhere and die.  Few will proudly state that if you do not have shelter go live on the street (just not my street).  While there is a certain chest beating, cathartic youthfulness about these proclamations it offends most people’s sense of responsiveness to these situations.  It may help some to think that suffering is the fault of the person suffering (as certainly may be the case for some) but pushing this very far starts to look like ‘protesting too much’ and really serves only to show that the pull of morality is felt only reacted to negatively and defensively. 

This feeling of responsibility for the suffering for others is what I mean by morality.  From the point of view of ‘my aspirations’, the suffering of the other is irrelevant.  From the ideal of pure self-interestedness there is no place for this feeling.  If the self is thought as the absolute metaphysic of individualism, the sole property owner, it does not serve the absolute interest of the self to care about the suffering of others; much less do anything about it that will not directly benefit the self.  While morality is an abstraction from the point of view of self-interestedness, it is nevertheless a notion that most are not willing to depart with.  Our self-interestedness tells us not to pay for anyone other than ourselves but the pull of morality will not let us ignore the suffering of the other.  Morality is the ghost of our group involvement.  It is the basis for the inevitability and indispensability of the state.

As I have discussed while our metaphysics of individualism compels us towards an aspirational future, our realistic, daily involvements are fundamentally based on language, community and group.  The capitalistic goal for moving into the upper class is itself a self-interested aspiration that embodies the notion of class, the group.  All this shows us that individualism is perforated with group involvement and community.  We are indebted to the other whether we acknowledge it or not.  While chest beating individualism may be fun for some, individualism, the sole property owner, is essentially a dream, a drama that gives us meaning in our ‘me-only’ self-centeredness.  However, individualism ignores the real ways in which we participate with others and are always already indebted to the other. 

Karl Marx went further than leaving the option of morality up to every self-interested individual.  Adam Smith as well understood the role of government in achieving the affluence and security of individuals in an economy, protecting them from exploitation and providing public works projects.  The communist notion of equalitarianism failed to make everything equal in terms of labor and preventing exploitation.  However, socialism attempts legal protections of groups and individuals that aim at fairness, equal opportunity, an equal playing field and protections in an economy.  It is important to note that ‘equal’ here is not some absolute ideal of equalitarianism as in communism but should be thought under the rubric of fairness.  Marx fleshed out possibilities for how this could work more than Adam Smith but Adam Smith would probably have more in common with the objectives of Karl Marx’ than many of the modern Republican, the neo-conservative, advocates of capitalism.

In any case, we are neither socialists nor capitalist; we are both.  The ideal of either is not where we live.  This is why there never has been a pure capitalism or a pure socialism.  All great economies have essential elements of both.  Beating others over the head with these labels may make some feel good but it is only a silly drama that fuels an inflated ego.  These kinds of accusations can also be used to manipulate less aware people but it is really only empty rhetoric.  The outcome of such practices is a chronic condition called hate and only hurts the hater in the long run.  I believe it is better to ‘see’ how we live and try to ‘understand’ our drives and aspirations as they show themselves without metaphysical hermeneutics, pre-cognitive dispositions and assumptions, working below the surface.  There is value in letting ourselves see and understand ourselves as we are and not in the service of some head game we play on ourselves.  In all great economies, socialism and capitalism are really only two different historical ways of thinking about the same thing – an economy that works.


[1] Adam Smith, Wealth Of Nations, [WN I.ii.2)

[2] The Forgotten Agrarian: Re-Reading Adam Smith, John C. Médaille, http://www.medaille.com/newadamsmith.htm, parenthetical numbers refer to section numbers in the cited Adam Smith work

[3] ibid

[4] Alas, you too young, free-market libertines who rail against the socialists in your rabid individualism – you too are a product of ‘group-think’ – it is called language – you just don’t know your indebtedness yet…

[5] Adam Smith, Wealth Of Nations, [WN I.vi.7-8: p 67]

[6] The Forgotten Agrarian: Re-Reading Adam Smith, John C. Médaille

[7] ibid

[8] II Thessalonians 3:10

[9] In accordance with Lenin’s understanding of the socialist state, article twelve of the 1936 Soviet Constitution states:

In the USSR work is a duty and a matter of honor for every able-bodied citizen, in accordance with the principle: “He who does not work, neither shall he eat.”

In Lenin’s writing, this was not so much directed at lazy or unproductive workers, but rather the bourgeoisie. (Marxist theory defines the bourgeoisie as the group of those who buy the labor-power of workers and engage it in the process of production, deriving profits from the surplus value thus expropriated. Once communism was realized, that is, after the abolition of property and the law of value, no-one would live off the labor of others.)

http://en.wikipedia.org/wiki/He_who_does_not_work,_neither_shall_he_eat

[10] http://www.marxists.org/archive/lenin/works/1917/staterev/ch05.htm

[11] Capital, Vol. I, Chapter 1, Section 4 (p. 78); Also see http://www.lrp-cofi.org/book/chapter3_transitiontosocialism.pdf

[12] Adam Smith, Wealth Of Nations, ([1776] 1976, 687–88)

[13] Ibid, (WN V.i.f.61: 788)

[14] Internet Encyclopedia of Philosophy, Adam Smith, http://www.iep.utm.edu/smith/   

[15] The Theory of Moral Sentiments, Adam Smith (TMS I.i.1.1)

Free Market Either/Or Government?

      After listening to some of the tea party people blog about the government and liberals being fascist, it occurred to me that one possible source for this could be the notion that what they perceive as a unilateral intervention by the government into the private sector is what they deem `fascist’ (I have dealt with the historical notion of fascism as it pertains to liberalism in another blog  http://mixermuse.com/blog/2010/01/03/fascism-is-liberal-and-squares-are-circles/).  They have an emotive perception that liberals are fascist.  Conversely, let me state that while I would not think of many Republicans as historical fascists I certainly understand the emotion that results from feeling like you are being forced against your will to do something you totally detest.  I felt the emotion many times when Bush was president (In particular, especially when my tax dollars and our children were being forced into two, in my opinion, absurd wars that actually created terrorists more than diminished terrorism. see http://mixermuse.com/blog/2010/01/08/war-on-terrorism/).  The feeling is that one is powerless to stop the perceived aggression against one’s higher ideals.  I have dealt with the notion of `higher ideals’ to some extent in the previously mentioned blog (also, see http://mixermuse.com/blog/2010/01/19/the-criminal-and-the-human-a-rational-approach-to-liberalism/ ).  What is the higher ideal that is at work in the tea party folks? 

     I think it may be that they believe the `free market’ is the ultimate dispenser of justice and equality over and above the government.  I have also dealt with the notion of the `free market’ in another blog (http://mixermuse.com/blog/2009/12/23/why-i-am-not-a-conservative/)  `Free market’ as well as `government’ is a social, organizing dynamic.  If the metaphysic of the `free market’ is at work in the emotion of an individual (the meaning-bestowing, intention projecting, higher ideals of an individual), the perception of violation, sin or moral conflict is brought to the fore of the individual’s psyche when external interventions are perceived as threatening.  Thus, the emotional latent word `fascism’ seems to capture the dilemma succinctly for the tea party folks. 

     With the metaphysic of the `free market’ there is the idea that all external intervention is wrong.  I have heard many conservative commentators and economists that are lassie-faire draw heavily from the assumption that all intervention (by this government is implied) is disruptive of the implied and pre-understood `justice’ of the free market.  This brings the higher ideals of such an individual in conflict with the compelling need to subsidize these violations with their tax dollars.  Thus, we see the name calling, town hall yelling tea party phenomenon.

This is my answer to those folks:

     Not all intervention is fascist and not all “non-intervention” is free market.  Free market is full of intervention – intervention is another word for competition.  When a big business competes against a small business the small business will lose in a head to head competition because big business is always the “senior partner”.  On the other hand, government intervention is not always wrong as evidenced by the FDIC, NPS, NIST, NOAA, CDC, NIH, FAA, etc.  Why draw an abstract line between government and free market?  Why not look at it in terms of the dynamics of small and large? 

     Small companies can generate innovation and efficiency and so can small governments.  Large companies and governments can provide mass products and solutions at lower costs due to economies of scale.  However, large companies and governments can become fat and bureaucratic and drive out new competition and innovation.  If there are no other big companies that can do battle, then we get monopolies, multi-national corporations, “to big to fail”.  What is there to restrain corporate totalitarianism?  If there is no government that is big enough to intervene then what could possibly stop a corporate totalitarianism? 

     If the free market hits a snag and can’t solve the health care crisis do we keep trying to believe that the issues are only related to the lack of a truly free market; the market is not “pure” but contaminated by government intervention or can we honestly look at our metaphysic of “pure” vis-à-vis “free market”.   If we analyze the economic structures in terms of power structures ranging from small to large scales what we see is a sort of Machiavellian war of all against all; a Darwinian survival of the fittest; a perpetual revolution.  As long as these economies of scale are kept from devolving into totalitarianism the benefits to people, individuals, cultures and societies can be allowed to grow, diversify and thrive.   If the market is left to itself there really is no way for the small to perpetually overthrow the large.  David may have defeated Goliath once but without God to intervene the odds get much worse.  It is free market “religiosity” that makes one think the small can always keep the large in check.  What is needed is battle of the Goliaths.  Goliaths learned a long time ago that collusion (i.e., price fixing) is much better than battle.  If there were no government to intervene, regulate, make treaties, etc. the multi-national corporation would have no incentive to address anything such as a “health care” crisis.  They would simply continue to spin their propaganda about how wonderful they and the free market are while millions continue to die in emergency rooms and without any health care.  The “free market” can work well within limits but every market must have limits as they will not limit themselves in all cases. 

     The only agency that can limit and require intervention when necessary is the government.  The government is not an ideal solution.  It is merely another Goliath among the others.  However, since a democracy (not a fascist or communist state) has other dynamics and entropies at work it has the innate tendency against collusion and for battle.  When the battle is diminished, Wall Street will win every time.  If the government continually squashes other Goliaths, totalitarianism will reign supreme.  In either case, individuals lose.  The natural regulation of the market is not found in Adam Smith or Carl Marx but in-between.  Those that are pure free marketers or communists will effectively promote totalitarianism.  Diversity should not be thought merely in terms of an un-regulated, pure free market but in terms of the natural antipathy between government and business.  When one side of that equation dominates individuals lose.  It is ludicrous to think that Goliaths will not arise when humans are present but Davids do much better when Goliaths collide than when God walks away and lets the Goliaths decide.  I suppose this means God is not lassie-faire.

Why I Am Not a Conservative

 

There is nothing inherently evil about government and nothing inherently good about private business.  Those that would insist on either can only do so based on dogmatic, immutable and therefore, un-falsifiable, ideological grounds.  Once an ideology is calcified into a meta-ideology of this sort no contrarian, empirical event can dislodge it.  A meta-ideology can only re-prove itself.  It becomes an object of faith and ultimately requires violence to maintain it. 

The necessary condition that determines the merit of government or private business is vigilance.  Government and private business is actually an organizational continuum from large to small.  Those that deem big government as evil also deem small government as good.  Those that deem big business as evil deem small business as good.  A powerful government is like a monopoly.  It can determine the “free market” cost of its products and services. It can also determine its cost of materials (i.e., negotiating mass purchases) and salaries (i.e., forbidding collective bargaining and unions, outsourcing, relocating) based on its economies of scale.  This inherent organizational capacity actually diminishes viable competition.  While governments generally can’t go global, multinational corporations are global.  To the degree that a multinational corporation is global, it can subsidize its many business ventures vis-à-vis its enormous capital resources.  This results in decreased competition in the market.  For example, when a government subsidizes agriculture it makes it much harder for other countries to compete on equal footing and therefore, minimizes the possibility for viable competition.  Likewise, when the availability of capital is subsidized by corporations with huge reserves of capital it can leverage itself to such an extent that it can offer its products at a much lower cost than other competitors.  Thus, for example, mortgages can be cheaper in all the countries that it competes in than mere regional companies.  Economies of scale are what make anything such as a “free market” only possible as a meta-theology.  The “free market” left to itself will not encourage competition – it will stifle it. 

If the values implied by the use of the word “free” are innovation and increased value for the consumer then the more successful a corporation is and the larger it becomes the less meaningful these implications are and, in the worst case, the word “free” becomes only a bankrupt ideal.  The disadvantages of economies of scale in government or big business are the loss of efficiency and therefore, vigilance.  To the degree that inefficiency grows in an organization, bureaucracy grows and organizational entropy increases.  Diversity is suppressed and conformity is encouraged.  In this case, the organizational dynamic is reductionary and is aimed at self-preservation rather than innovation.  Conserving the inertia of the organization reduces the need for responsiveness to conditions outside the organization.  Responsiveness is vigilance.  Increasing organizational vigilance increases value to the consumer.  To the degree that an organization is enmeshed within itself also decreases value to the consumer and simultaneously makes competitive entry more difficult.  The result is a monopoly.  Furthermore, when a few large multi-national corporations determine a market segment without limitations the dynamics of a traditional single corporation monopoly equally apply to the market segment.  Competition decreases and inefficiencies increase.

Historically, such super-structures will collapse in on itself whether it is a government or a multi-national corporation but not before much misery and even tragedy has been expended.  The question that must be brought to the fore is, can we influence structures that are created by us to intervene before the natural death of our super-structures to prevent its cataclysmic havoc or do we adopt a lassie-faire approach in adherence to a non-retractable mega-ideology?     Government regulations can be implemented to protect the integrity of a governmental super-structure (self-protection) or to break down super-structure tendencies in multi-national corporations and increase competition and innovation in the market.  If government regulations stifle competition and innovation then, in a democracy, voters regulate the regulators by getting rid of them or, if not a democracy, then revolution. 

Revolution is the natural consequence for an oppressive government, super-structure to die.  However, the human cost is enormous.  Democracies intervene before this natural consequence is allowed to play itself out.  Democracy proves that it is possible to intervene and stifle the inertial effect of our government, super-structures.  Likewise, sound regulations whether on a national or international level can intervene in the natural death of a multi-national corporation.

 It would be sheer pessimism to insist that regulation cannot reduce the fallout from the natural death of global monopolies.  What this position really demonstrates is a mindless adherence to the meta-ideology of a mythical “free market”.  In this case, pessimism assumes nothing can be done to intervene in global monopolies and resulting economic catastrophes.  Lassie-faire hides an economic fatalism under the unquestioned metaphysic of a “free market”.  Pessimism always protects its underlying, unquestioned metaphysic.  If there is no underlying metaphysic then it is simply nihilism and pessimism is itself meaningless.  Unabated nihilism may rarely lead to creation but most typically results in infantile narcissism.  The only practical, alternative course of action is to intervene in the natural course of the market to prevent its global, cataclysmic demise. 

                Another inequality built into the global market is the varying temporalities of capital acquisition.  Multi-national corporations that are imbued with its own guiding value for self-preservation tend to make major decisions with its guiding principle favoring short term capital gain versus long term capital gain.  Ventures like research and development into fundamental new technologies are long term capital ventures.  If a large company can see a viable way to preserve itself by reducing this type of research and development, it will generally choose to do so.  This is how the auto industry in the United States has lost its way.  Instead of pursuing alternative energy for cars, they spent their time leveraging their current gasoline based technology and simultaneously trying to intervene in government regulations to preserve their existence.  Long term fundamental research into new technologies can never be equally competitive with short term capital gains for multi-national corporations.  If the natural tendency to realize short term capital gain in the market is not overcome and intervention does not occur then research and development is put off until it is too late.  The temporality of this type of research and development cannot be made to realize short term capital as other alternate strategies. 

                In medicine government has proven that public funding can offset the inherent inequities in long term research and development.  The government has used grants successfully for many years to introduce fundamentally new technologies into the market.  This technique can be generalized into energy and other pressing needs.  While this is not government intervention in the form of regulation it is a pro-reactive government intervention.

                The last point that needs to be made here is the crash course that traditional conservatism set us on.  Conservatives want “free market”, lassie-faire capitalism.  They also want less government.  This means less government intervention.  As has been pointed out smaller is good in terms of efficiency and innovation but in terms of checks and balances for multi-nationally corporations (or super-structures) less government intervention means the market is left to implode unimpeded from time to time.  Since the market is global and corporations can and will expand beyond the borders of a country, a policy of non-intervention and small government will not favor any particular country.  Capital and wealth can freely flow out to other countries beyond our borders as has been the case in recent years.  To insist that a “free market” thrive as conservatives would like is simultaneously to give up the notion to maintain our government’s status and ultimately, our self-preservation.  To insist that we are always going to be the best at every major undertaking and therefore always prolonging the existence of our government is to ignore the lessons of history and demonstrates another meta-ideology.  In the practical world, both conservative positions cannot be simultaneously held without sacrificing one.  While we do not want to condemn our country to oblivion we also do not want the government of the United States to take on the super-structure, inefficiencies previously discussed.  A global market owes no allegiance to a country.  The only way out is not to conserve but to intervene wisely.

Socialism and Capitalism

The US is already a mix of socialism and capitalism.  If socialism is always evil then I guess not only are you against the recent government action to buy into private banks and bail out the economy (by the socialist Bush administration) but you also want to get rid of social security, Medicare, Medicaid and  the Department of Education.  Is any government intervention wrong i.e., Iraq and Afghanistan?  Why would you stop anywhere left of Adam Smith?  Heck, why have his “limited government”?  What not privatize the military and local government?  Hey, why not get rid of all government?  Can’t the market self-govern?  How far do you folks want to go with this?  You seem to throw these terms around as some sort of code words but I would like to know how far you want to go with the direction you imply.  Where would you stop and why?  It is always easy to make negative statements but much harder to think through the ramifications of your implications and make positive statements of your ideals.

Republican Spin

“Perception is everything” appears to be the organizing paradigm of modern political campaigns in the US.  Technology and capital have combined into the perfect storm for managing perception.  Perceptions thrust into the early years of technology kept the Republicans largely out of office for decades after FDR and the Great Depression.  Republicans were portrayed as the elitist party of the rich.  They were opposed to the plight of the average working guy.  In the seventies with the economy worsening and gas lines growing long the Republicans saw the chance to grab the reins of perception.  Instead of the perception of concern for the working man in a time of economic affluence the Republicans saw that the economic reality of a weakening economy was a perfect moment to launch their perception of tax and spend.  The Democrats were not the party of the working man.  They opposed the working man by spending frivolously and even selfishly.  The Democrats were the true elitists.  However, the underlying necessary condition that allowed this perception its oxygen was a changing economic reality.  In a time of affluence, social programs are a plus in political marketing.  When money is not a concern it is easy to spend, to create images of ourselves as holy, caring, giving.   However, when economic needs start dominating the day to day experience of voters, the time is ripe for creating the perception that tax and spend liberals are to blame, leftist elitists bent on nothing other than benefiting themselves at the cost of the common Joe.   The Republicans seized the perceptional opportunity with Ronald Reagan and controlled the perceptions and dialogs for decades.  They cloaked their conservative ideology in the modern garbs of egalitarianism and the working Joe’s fight against the liberal elite.  Liberal, the “L” word was profane. 

Now, the managed perception of Republican ideology has become fat and ripe for takeover.  Economic realities have again given an occasion ripe for perception’s paradigm shift.  The elite have now become the ones in power, the ones to blame, the party of the elite.  The true Republican believers have fled into the concaves of their historical, conservative ideology and left the neo-cons to fend for themselves.  The righteous indignation of the true conservatives is set to blast the folks that enabled their political domination.  While Republicans were all too happy to get votes and cater to their perceptual electorate, they also discovered that managing perception came with a cost.  It cost them their conservative soul.  Now that they appear soulless, bereft of new ideas, bearing the burden of the image of fault and elitism they have retreated.  Those that are the party faithful have hunkered down into their ideological roots to regroup and try to re-forge an image for another day, an opportunist day.  Conservatives are looking at perhaps decades in the perceptual doldrums.  The smart ones know it.  The last desperate screams of the dying McCain campaign are shrill and are now working to dismantle the last bastions of their credibility.  As many Joe’s are saying, “If a Republican’s lips are moving they are lying”.

What shows itself in this spectacle is that “perception is not everything”, perception is an opportunistic infection of economic reality.  When reality happens the managers of perception lose.  They are ripe for takeover.  When “management” begins to believe its own propaganda it loses touch with the shifting sands of reality beneath their feet.  However, necessity requires that “Joes” keep a healthy stand in underlying realties, that they do not take the manufactured perceptions too seriously and, when perceptions grow thin, the perceptual power brokers find they are touch with their own economic realities.

Capitalism or Marxism

What is it we do not like about Marxism? Is it the lack of motivation to create real value? What is the practical difference between a government based economy and a credit based economy? When money is free, money has no value. If Capitalism or Marxism is in the business of bankrupting value there is no difference with regard to the disruption of production. Why extol the virtues of Capitalism when it enslaves folks to getting more debt/credit to pay off last month’s debt/credit? Any influx of capital that is so large no one could ever spend it, even in the form of endless credit, will squelch motivation, reduce productivity and motivation – it reduces value. Don’t think for a second that capitalism is inherently immune from `what the bad guys do’ or that government is the only way to bring an economy to a grinding halt (to repackage a quote – those that do not learn the lesson of recent history only welcome it once again) – private enterprise can just as easily conjure up all the practical evils of the dreaded Marxist ideology.