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Erik Kain

Erik writes about video games at Forbes and politics at Mother Jones. He's the contributor of The League though he hasn't written much here lately. He can be found occasionally composing 140 character cultural analysis on Twitter.

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15 Responses

  1. A few points and questions:
    1. I’m not quite sure how you’re defining capitalism here. A central tenet of most free market/capitalist thought is the need for clearly defined private property rights, but you seem to argue that property rights in capital are ill-defined in capitalism. To the extent this is true, it would not seem to be a symptom of capitalism or the free market but rather evidence that capitalism and/or free markets don’t exist.

    2. To the extent you argue that capitalism causes inequality, I don’t think the statistics back you up – play around with various economic variables keeping the Gini coefficient as your x axis at Gapminder (the world’s coolest resource for things like this). You’re just not going to find anything that looks to have a strong correlation with inequality besides other statistics that try to measure inequality- including things like a country’s reliance on the industry or service economy, overall taxation rate, etc. While this certainly prevents a conclusion that capitalism reduces inequality, it also prevents a conclusion that it causes inequality.

    3. While this is perhaps a bit doctrinaire, there is at least a little kernel of truth in the argument that companies that become “too big to fail” do so only because of government intervention in the economy on their behalf, something that is obviously antithetical to any conception of a free market.Report

  2. Avatar E.D. Kain says:

    Mark,

    Those are good points, and I’m not really advocating a split entirely from capitalism, only a rethinking of its implementation. Perhaps neo-distributism is the term. In any case, I’m still waiting for that long-promised response… 😉Report

  3. I know – writer’s block is killing me!Report

  4. Avatar Dave says:

    This abstraction reached new levels of capitalist purity in the current housing crisis, where home buyers were severed almost entirely from the mortgage institutions.

    S&L’s began selling mortgage-backed securities when they became deregulated in the early 1980’s (the story of which is chronicled in Michael Lewis’ Liars Poker), yet we had no problems with mortgage-backed securities until now. The problem had very little to do with severing buyers from mortgage institutions and more to do with severing the ultimate investors of the bonds collaterized by the underlying mortgages from the true nature of the risk they were assuming.

    Interesting post. It’s certainly not my perspective (i.e. I don’t see abstract forms of ownership in financial assets) but one worth commenting on at some point when I’m not cracking bad bailout jokes.Report

  5. Avatar Dynamic says:

    To address Mark’s points:

    1. To generate truly free markets of the type required for idealistic capitalism, private propety rights must not only be clearly enumerated but also genuinely ensured. Absent government regulation (or some other form of parallel system to provide recourse), there is no guarentee of continuity for private property rights and no market stability. The rules for today might apply tomorrow, or they might not. You see how easy it is for the wealthy to set their own rules now – imagine how drastically and fluidly (and at times irrationally) the rules might change without the relatively stable beauracracy of government as a foil.

    2. The essence of capitalism is, at heart, a means of distilling people into classes. Success or failure is measured by the accumulation of capital. On its own, this doesn’t imply a necessary path to inequality – but the increasing abstraction of capital from production that E.D. discusses above acts, over time, as a distortion on the meritocratic heart of capitalism. If I’m taking a test and I study hard, I can probably do very well – but if everybody with the name Rockefeller starts the test with 100 points out of 150, I can never hit anything higher than the 98th percentile. Similarly, if the most efficient way to generate capital is through owning and moving capital, the disparity between wealthy and poor is only going to get greater every generation – and in a system geared, as you say, to distill the most efficient means of generating capital, it becomes clear that this tendency towards inequity is part of the very soul of capitalism.

    3. I’ll have to take a pass on this one – I’m not sufficiently studied on the topic to have a well-informed opinion.

    Proponents of capitalism mock socialism as ‘idealistic’ and impractical, yet fervently believe that the stock market responds rationally to 100% of economic stimuli, despite being populated by imperfectly rational human beings . What we’re really after is the economic equivalent of Founding Father’s democracy – a system with a firm set of regulations (laws) designed to foster a society where we are all free to enjoy our fundamental rights to life, liberty, and the pursuit of happiness.

    Remember that in a democracy (and I know this is going to sound idealistic in the extreme, but bear with me) the government IS the people – so to say that “the state” owns everything in a socialist society is something of an obfuscation, though one grounded on real-world experience. The end goal is a society where “the state,” in a very real sense, IS the people – and thus the people own everything, collectively. In this situation, trillions of dollars can’t simply evaporate, because it’s hard to speculate on people’s homes when you own ALL of the homes – and so does everyone else.Report

  6. Dynamic:

    First – have I mentioned I’m happy to see you over here? Because I am.

    Now, on to your arguments:

    1. Agreed – to a point. Certainly you need to have some “rules of the game” to have a prosperous (by any definition, including E.D.’s) form of capitalism, at least as long as you’re not an anarcho-capitalist. The trick is setting up those rules in a stable way that tends towards increasing competition rather than crowding it out. One problem with our current regulatory regime (perhaps a subject for a future post/discussion) is that Congress has delegated far too much authority to the regulators in a way that virtually guarantees regulatory capture.

    2. Some of this is going to be implicitly addressed in a post I’m currently working on, so I won’t respond to those issues right now. But the thing I want to emphasize is that the empirical data don’t seem to back up your point that “tendency towards inequity is the very soul of capitalism.” That’s why I pointed to the Gapminder data – there is no discernable correlation that I can find between inequity (the measure of which is usually the Gini coefficient) and various manifestations of modern capitalism. It’s just not possible to find either a strong direct or inverse correlation between the Gini coefficient and things like capital creation, the size of the service sector, the size of the industrial sector, etc. That said, it does look like there may be at least a loose correlation between inequality and geographic factors like population size, urbanization, and land area. I’ll have to do a more formal analysis of the data at some point, but as far as I can tell, inequality seems to have very little to do with a nation’s variety of capitalism.Report

  7. Sorry – I forgot to address your last set of points.

    First, I’m not aware of any capitalist proponents who think that the stock market responds rationally to 100% of economic stimuli. To be sure, there are some die-hard partisans who focus on the day-to-day goings on in the stock market as some kind of determinant of whether an event is “good” or “bad” in the long run, but that is by no means a tenet of capitalism or the free market. The strongest argument against socialism is simply that it is not possible for any individual, group of individuals, or computer to fully understand the effects of a given action, also known as “the calculation problem.” There are just too many variables at play, some of which are unquantifiable normative variables.

    As for the aim of abolishing all concepts of property….what you’re referring to can only exist in a stateless society, ie, anarchy. If you are to have a state at all, you need to have some conception of property rights, even if only to determine what is and is not within the state’s jurisdiction and power. That’s not meant as a perjorative, by the way – I actually have come to have quite a bit of respect for anarchists, even if anarchism takes a view of human nature that I think is unrealistic.

    Finally – I fundamentally disagree with the notion that the government IS the people in a democracy. Instead, I would posit that at best government in a pure democracy is 50% plus one of the people, which is why a constitution that places restraints one what a democratic or republican (small d and small r) government may do is so utterly necessary.Report

  8. Avatar Bruce Smith says:

    The cause of the economic tsunami we are all witnessing can be explained quite simply. Wall Street was allowed to develop the equivalent of a mammoth, parallel and counterfeit, currency that can be called TMB, or Toxic Mortgage Bonds (Bombs). The financial institutions of Wall Street (which are inter-meshed with other financial institutions throughout the world) were then allowed to distribute these TMB’s globally. Of course, as we now know they exploded resulting in a massive scramble by the financial institutions to achieve liquidity by whatever means possible including severely restricting lending both to customers and amongst themselves in the form of inter-bank loans.

    We have to ask ourselves why government allowed this parallel and counterfeit currency to happen not withstanding the $5 billion over a decade that Wall Street spent on politician’s campaign contributions and lobbyists to advance deregulation. I would argue that it can be traced to a widespread acceptance of two key Libertarian ideas by Democrat and Republican (Labour and Conservative in the UK) politicians. These two key ideas were that the role of the state should be minimised especially in the area of business enterprise regulation and this should be done because of the second idea that the market always knows best how to minimize risk. In other words Libertarians tell you that you can always trust everybody except politicians to do the right thing. Anarchism plain and simple!

    The Libertarians who brought you these two ideas were Friedrich Hayek who influenced Milton Friedman, and both influenced Margaret Thatcher and Ronald Reagan and on down the line. Hayek took Adam Smith’s “Invisible Hand” idea of the market being the best automatic mechanism for utilizing resources to the extreme of being against any kind of state central planning and as little regulation of the market as possible despite Adam’s Smith’s reservations and warnings about doing this. Milton Friedman took his Libertarian stance to such wacky extremes that he was willing amongst other ideas to sanction in the name of freedom heroin being sold at the school gates and no licensing system for doctors or other professionals. Thatcher, of course, is famous for her quote that “there is no such thing as society,” and Reagan for his electioneering line that the last thing you wanted to hear is for someone to come up to you and say “I’m from the government and I’m here to help.” Of course, all of the above Libertarians failed to recognize that the financial industry is different from other businesses in terms of the depth of its inter-relatedness and Moral Hazard could never as a consequence be on the table for the really big financial institutions. One can well imagine that Richard Fuld, the CEO of Lehman Brothers before it entered into bankruptcy proceedings, going down on his knees to pray for Henry Paulson to send somebody from his Treasury office to offer a government bail-out solution! Maybe as he prayed he also cursed Ronald Reagan for being such a dumb-ass!

    The promotion of Libertarianism is now waning and is quite naturally being replaced by a revived interest in Communitarianism which is a move to the center. I say naturally because the command economies of Communism and Fascism after the Concentration Camps of Hitler and the Gulag Archipelagos of Stalin and Mao are perceived as political and economic anathemas. Contained within Communitarianism is the philosophy of Distributivism as previous articles here have outlined. Gilbert K. Chesterton and Hilaire Belloc were active in the promotion of its philosophy at the beginning of the last century and their ideas were partially taken up by the German economist Wilhelm Ropke who was the main influence on Ludwig Erhard, the Economics Minister, credited with the success of the German Social Market economy after the Second World War. Ropke also has had strong influence on the American conservative Fusionist movement. Today the main running in getting Distributionism and Communitarianism translated into power is by Phillip Blond in the UK who has managed to convince the Conservative shadow cabinet led by David Cameron to take on board the ideas of these philosophies. There is a strong chance that the Conservatives will win the next General Election as soon as Labour’s term in office expires, probably November 2009 or May 2010 (The Prime-Minster under the British system gets to name the day within the maximum five year term.) Gordon Brown, the current Labour Party Prime-Minster, is too heavily identified with the economic recession having been the Chancellor (Treasury Secretary) for many years under Tony Blair before becoming Prime-Minster. Gordon has clearly aligned himself too much with Thatcher’s economic Libertarianism philosophy for the taste of many members of the electorate. They are appalled at the excesses of the feral capitalists within the financial industry both there and in America and at the devastation they have caused to their communities and will want to move to a center of communitarian and distributivist solutions.

    All of the individuals I have mentioned as being advocates of some form of Distributivism have been Christians with the majority being Catholics. Phillip Blond is no exception having been raised in Liverpool which has a strong Southern Irish Catholic immigrant community going back to the Irish Potato Famine and probably earlier. He has degrees from Hull and Cambridge University specializing in Philosophy and Theology. He has said that his ideology which he sensibly calls Progressive Conservatism (Communitarianism and Distributivism being hard to spell for the best of us!) had to come from grappling with theological ideas and not from conventional political philosophies. Phillip is a member of an influential group of Christians called Radical Orthodoxy which is led by the academic John Milbank. This group is not entirely Catholic but contains Protestants but most it would seem have been influenced by the ideas contained in the encyclical of Pope Leo XIII, Rerum Novarum published 1891, Pope Pius XI’s encyclical Quadragesimo Anno published 1931, and Pope John Paul II”s encyclical Centesimus Annus 1991. Principal amongst the encyclicals are two ideas that of Subsidiarity and rejection of Liberalism. Ironically Subsidiarity which contains the notion of nothing been done at a higher level of organization than needs be, for example local state versus central state also relates to Libertarianism’s suspicion of the state in any form. If Libertarianism is an extreme version of Liberalism then making judgment calls on the role of the state in Distributivism and Communitarianism has to be carefully considered. A filter of whether a decision, or policy implementation, will have an Asocial or Social outcome has to be continuously applied. However, the rejection of Liberalism by Catholic and Radical Christians because it represents the secularization of society with its subsequent attendant ills is fraught with difficulties. If secularization represents the encouragement of selfishness and atomization then a return to the embrace of religion, especially the Catholic Church with its Middle Ages history of corruption and persecution, is not seen by many as a positive way forward. (Do visit the article “Banking on the Church.” by Adrian Pabst (A close Christian friend of Phillip Blond’s) in The Guardian, Wednesday 11th March 2009. Many comments at the end of this article are anti-religion and especially towards the Christian Church.)

    Personally, I am a Deist attached to no practicing religion but for many years it has seemed to me that you can energize your moral beliefs by a belief in God. However, it has always seemed a weakness to me that this belief has to be a single entity God. If I asked myself if there was more benefit and naturalness to have a Mother and Father God I would have to answer in the affirmative. I read somewhere long ago that up until 300 years AD the Christians did worship Mother and Father Gods but the Gospels then got sanitized presumably by a male church hierarchy to strip out Mother God. Motivations for doing this would be many, testosterone driven aggression, fear of female sexuality, the biological drive by males to widely disseminate their genes not least through the practice of polygamy and perhaps most importantly of all that authority can best be legitimized by having a single source of command (The Divine Right of Kings to Rule.) The reason for raising this is that if you can imagine a long standing cultural tradition of having a Mother and Father God of equal authority it cannot help but change your perspective on the leadership process within any organization. That process like the best of families would be one of dialogue, negotiation, teamwork and partnering. As children our nurturing period is lengthy and we cannot help but subconsciously absorb the model of authority operating within our family. I would argue that if we had been subject to a long standing tradition of Mother and Father Gods reflected within the family we would be more predisposed to seek Communitarian and Distributarian solutions to our organization of society. This I think would have especially been true of economic organization. However, I think you can also flip everything that I have just said and argue that if as human beings we had a long cultural tradition of cooperation through the philosophies of Communitarianism and Distributivism the extent and level of our morals would be higher and religious belief optional. What after all is the major component part of God’s will as currently taught in religions other than the conceptual idea that it is best to cooperate with each other and treat others as we would like to be treated. The main thing now is for human societies to understand the limitations of Liberal and especially Libertarian philosophies. As Karl Polanyi says you can’t get away from the fact that our economies are embedded within our societies.

    This last point brings me to something that I think worth raising. Phillip Blond has used the phrase “the re-capitalisation of the poor” to describe one of the key components of distributivism which is to ensure that for everybody as much income as possible is derived from the ownership of income producing property in order to reduce reliance upon state welfare. This is usually believed to mean outside of land distribution the dispersal of stock ownership in businesses with workforce control/participation in decision making. The means of achieving this are relatively straight forward in terms of financial formulas for buyouts. However, it is important not to forget that there are many individuals who have roles to play outside of working in businesses, parents who want to raise children, carers who want to look after incapacitated relatives and friends and finally the elderly and retired. Provision needs to be made for these people to participate in the growth and income from business enterprise.

    One last point I think worth bearing in mind in the push to a society of Communitarianism and Distributivism and that is we should not dismiss the role of the central state as the lender of last resort and fiscal stimulus since we wish to retain the market system. I believe the jury is still out that we understand enough to moderate the peaks and troughs of business cycles and be able to dispense with the central state.Report

  9. Avatar E.D. Kain says:

    On that last point, Bruce, I think there is room (or perhaps necessity) to have a strong local/national partnership. But the roles really need to be reversed. The Federal government should do little more than protect and keep order. They should not play such a dominant and dangerous role. In any case, I need to read that post of yours again. Lots to digest.Report

  10. Gentlemen, this is Roy F. Moore of the web log “The Distributist Voice”. I’ve linked to this article on our web log, and it reads very well in favor of Distributism. Congratulations on it, and keep up the discussions and the good work.

    For any of your readers interested, we have links to other Distributist sites on our blog. I encourage you to check them out and see what you think.

    Many thanks for your time and attention.Report

  11. Avatar Dynamic says:

    And I’m glad to be here, Mark.

    I’ll try to pop in when I can, I’m often out of town and away from computers, but you guys have a great community building here, with a lot of smart folks saying a lot of smart things, so it’s worth keeping up on when I can.Report

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