“Thieves respect property. They merely wish the property to become their property that they may more perfectly respect it.”
The process of determining who is to blame for our current economic crisis is daunting. This is because for each villain one discovers, one must then discern the villain’s motivations; what historical conditions facilitated or inspired the villain’s capacity to harm; and then whether those historical conditions are part of a larger systemic or cultural or socioeconomic failing. So, for instance, when we dig a little and find the overseers of the current meltdown – the CEO’s of the financial institutions whose black magic created this fiasco – we then become compelled to dig deeper still. After all, where was our government in this debacle? Isn’t a government’s purest purpose to protect its citizens, both from abroad but also from within?
Then again, to lay the blame at the feet of the government is terribly short-sighted as well. After all, the government’s lack of oversight in this matter is essentially in keeping with the general trend of deregulation and modal monopolization of markets, and especially financial markets, that has defined the past few decades. We need to dig deeper yet. Philip Blond describes a modal monopoly as
“a model of monopoly that extends beyond whether an individual company has undue market influence to whether a certain mode or way of doing business constitutes a cartel. For example, the great housing crash is primarily the result of the absorption of all local, regional and national systems of credit into one form of global credit.”
What strikes me about this is how similar this concept of modal monopolization is to the concept of an increasingly all-powerful centralized state. Big government and big business seem to grow apace; and at the same time, globalization and the rise of the financial industry to a predominant position in our modern economy seem also to be directly linked.
In any case, the only really poignant observation I can come away with from this increased financial modal monopoly is that it is, essentially, the logical conclusion to a liberal, capitalist system. In other words, in a capitalist system the ownership of property becomes ever more abstract, and the distribution of said property becomes ever more skewed in favor of the very wealthy. This is, in practical terms, not so different from socialism, in which property becomes the sole purview of the state itself. I would argue that the logical conclusion of both systems is fairly similar. Whereas socialism has a difficult time doing this efficiently, the end result of the vast majority of all property and capital ending up in the hands of the few is almost indistinct from a purely capitalist system. The only end difference being, naturally, whose hands the capital ends up in, and in what quantity.
The abstract notion of property ownership as an economic right becomes ever more abstract as we move further and further toward national and then international corporations; and even more so when we enter into the international finance world, where capitalism is at its purest. What I mean by this is, ownership of capital is almost entirely abstract in the investment banking world. The ownership of capital and the actual labor and production are almost entirely detached. This abstraction reached new levels of capitalist purity in the current housing crisis, where home buyers were severed almost entirely from the mortgage institutions.
Essentially liberalism and capitalism suffer in three ways:
1) Property ownership is viewed as an economic right, and capital inevitably as an abstraction, with the actual production of goods and services completely severed from the ownership of the company that produces them. A shareholder in a mutual fund has very little other than capital invested in the companies he has become financially staked in. This leads to short-sightedness and piroritization of profit maximization over more long term concerns. Quarterly profit reports become far more important than long term business plan. This is the instant gratification quotient. It is bad capitalism, but it is also the status quo.
2) The goal of capitalism is to efficiently produce goods and services in order to earn profits. As restrictions to this are lifted, companies grow larger, their means of attaining profit become more efficient, and theoretically consumers, workers, and capitalists all benefit. There a number of problems with this theory, however, all of which we can observe in the symptoms of the modern world. As domestic markets are replaced by global markets, and domestic workforces are replaced by global workforces, entire industries become unnecessary or unsustainable. Manufacturing is replaced by finance. Local restaurants are replaced by national chains. The more purely capitalistic an economy, the fewer actual capitalists remain, replaced instead by a low-paid, over-worked service workforce, and the sort of workaholic pathology Scott touches upon in his latest piece.
Likewise, finance replaces industry. Capitalism for its own sake, and thereby profit for its own sake, replaces the importance of actually producing goods.
3) In a capitalist system everyone has a right to own property, but the more purely capitalism manifests, the fewer the number of people who actually are able to own property becomes. Capitalism lends itself very well to class divisions, and the only solution to the natural inequity of a capitalistic society, is the intervention of the state and the redistribution of wealth vis a vis high taxes and social services. Thus, as big business grows, so too must the state, and conversely as the state grows, so inevitably does big business.
All of which is to say that the thieves who led us down this road were merely walking the inevitable path we as a society had set for them, and they more profoundly for us. This does not excuse lousy management or criminal activities, but it does go to show that capitalism as a model of economics is theoretically very efficient, but in practice too centralizing and, paradoxically, too chaotic. It leads to the sort of massive too big to fail institutions and governments that dominate our world today. Capitalism without restraint or equitable property distribution leads to unsustainable inequities. Globalization allows the financier class to shred national economies in order to more cheaply distribute and produce goods across the globe, maximizing the profits of the capitalist class while slowly bribing the middle class into oblivion with the advent of cheap goods and easy credit.
So it should come as no surprise that a populace that has lost all sense of property ownership was taken unawares by the financial meltdown. Nor should it come as any surprise that our government came to the aid of big finance faster and with more gusto and urgency than they aided any other segment of the population, for the finance industry is the epitome of capitalism – in its most detached and most purified form. The fact that too much of our economy rests on indebtedness has never been made so plain: we are told that bad lending got us here, and at the same time lament that more lending is not taking place. We are told that we would be better off to save our money, but that if we do not get out and spend our economy is in dire peril.
Imagine, if you will, an economy based on localism instead of globalism. Credit unions flourish instead of massive, international banks. The mortgage you purchased is still owned by the bank or credit union that sold it to you. You eat at a restaurant that can be found nowhere else in the world, and purchase groceries at a local grocer who buys his produce from local farmers. Could any thief ever cause so much harm in this scenario? A corrupt businessman or politician could certainly cause a great deal of pain to his fellow citizens in the town or region, but this harm would have a much more difficult time spilling over into adjacent communities. A subprime mortgage scandal confined to one town or county would hardly stop the national or global economy in its tracks.
This is one reason, but certainly not the only reason, that local control and small business and finance must be restored. Big business and big finance especially must find their way to the scrap heaps. As Philip Blond notes,
The final piece of the puzzle is for Conservatives to break with big business. We must end a model in which competition is reduced to a cartel of vast corporations maximising profits by discouraging competitors and minimising wages by joining with the liberal left to encourage mass immigration. A covert alliance between the liberal left and liberal right has destroyed incomes and identity at the bottom of the scale.
A society must be grounded on the basis of good order and social stability. This means that a balance must be struck. When government becomes too centralized, or when capital is so displaced that local communities are no longer self-sufficient then something has gone terribly wrong. The order of things has been replaced with the drive to gather wealth into the hands of the few in the name of economic liberty. More to the point, the gathering of wealth has replaced the necessity of civil order, and the one definition of liberty has replaced the other. No civilization has survived the loss of its middle class. This has long been the fatal flaw of socialism, which “levels” society by obliterating the middle class and the upper class in favor of the totalitarian state and the “worker” class it supposedly represents. It could as easily be the fatal flaw of capitalism, as the middle class is usurped and the low-paid service worker class grows larger and poorer.
So perhaps the best way to keep the thieves out is a third way.
As Robert Moynihan notes:
While socialism allows no individuals to own productive property (it all being under state, community, or workers’ control), and capitalism allows only a few to own it, distributism seeks to ensure that most people will become owners of productive property.
This model seems to be what Blond is driving at in his Red Tories article, and the “radical social reform” that Blond hopes David Cameron will institute should he come to power. Now, I grant that distributism has its limits. There are many products that are simply very difficult to produce locally, such as cars and computers. I would replace this notion of total locality with at least a protection of domestic industry. The more our own manufacturing and production industry is protected, the more robust our domestic economy and the greater the purchasing power of the middle class, which in turn could empower local communities to invest in local businesses. Some blend of a protected and vibrant domestic industry and a decentralized, local economy is the only practical way forward. Blond’s push for local investment is exactly right.
Moynihan sums up distrubitsm:
According to distributism, the ownership of the means of production should be spread as widely as possible among the general populace, rather than being centralized under the control of the state (indirect socialism) or a few large businesses or wealthy private individuals (capitalism).
In short, a few things that might help check the sort of dangerous capitalism and growth of government could be:
1) The advent of guilds to supplant unions and limit corporate power and the spread of national corporations.
2) A return to local finance and procurement.
3) Protection of domestic industry.
4) Return of government functions to the local level and the end to “private” government at a national level.
5) Employee ownership of companies as opposed to a public, stock-based system. Limitations on the public sale of stocks would be necessary, and could be enforced, perhaps, through the guild system. Limitations on the growth of companies beyond agreed upon regions would also be necessary, though I admit such an effort would not be easy. Good, healthy competition must still be fostered.
Essentially, capitalism fails because it is too efficient, too perfect in its implementation, and too devoid of human qualities. Chesterton says it best: “Too much capitalism does not mean too many capitalists, but too few capitalists.”
Indeed, and too many thieves.