Tuesday, February 07, 2006

Capitalism is not the problem

I'm a few days behind the news, ironically because I'm trying to understand economics in general. But catching up with Chris @ qwghlm regarding Tim Worstall having a go at Rob Newman in the Guardian about the nature of capitalism is always good, hearty fun.

Unfortunately, the myriad comments (including he blogger's) at Tim's remind me why I'll continue to mostly-ignore the fevered ranting of economists - an overwhelming ability to attack things in terms of theory and definition, and a particularly underwhelming ability to ignore everything else.

Take the original Guardian post in question, for example. Worstall originally takes issue with the definition of "capitalism" as laid out by Newman, which is perhaps a fair point, but then proceeds to place faith in technological progress (something that Justin @ Chicken Yoghurt argues with).

Personally, I'm on the fence as to the case here. Technology certainly has much to offer, but I wouldn't be so naive to place my faith in it. There certainly is a possibility for a capitalist system (ever-expanding markets, equal competition) to overwhelm a resource. I don't see, for instance, a particular technological solution emerging to rectify the similarly-framed problem ("market failure") of over-fishing. Once could say that our entire agricultural system is a technological fix to the scarcity (relative to population) of food, but the emergence of a lust for organic farming and non-GM crops shows that there are difficulties inherent with such a technological attitude.

But I digress. Worstall backs up his defence of his definition of capitalism by de-linking it from resource-intensive production:

"Even if we had (this looney’s) desired world straight out of the self-sufficient medieaval village, people would still develop new technologies and thus there would still be economic growth."

This is certainly true, in theory. Capitalism doesn't necessarily imply ever-more-inefficient technologies. But here my annoyance with the sidestepping dances of economists kicks in. Worstall seems to stop reading at this point, possibly so angry that someone might misconstrue the "true" meaning of capitalism simply by trying to observe it in motion. For Newman's actual point is this:

"Much discussion of energy, with never a word about power, leads to the fallacy of a low-impact, green capitalism somehow put at the service of environmentalism. In reality, power concentrates around wealth."

Yup, theory vs reality. The economist's bubble vs the real world. Yes, I agree that Capitalism can/should move away from inefficient technologies (assuming that it's less costly - not always the case), but Capitalism isn't the real world, and you can't simplify what really happens to a model in which people act as you hope they'll act.

Economists know there are (many) problems with Capitalism - these are called market failure. But there are problems also with trying to apply a theory to life. "Implementation failures", perhaps. Most economists would rather twist the world so that it matches their lovely model, rather than realise that the model is just a model.

The problem, then, is not Capitalism. From the Capitalist's point of view, the problem is that the world fails to fit their thinking. This is obviously foolish. The real problem is that we use Capitalism as a shield, a platform to base our ideas and decisions on, and a way to construct benchmarks and system measurements that measure what we want to measure.

All this time, we blind ourselves to the idea that things work differently - sometimes, very differently indeed. We have power, we have corruption, we have nepotism, and all the rest. Simply arguing we should have more laws when the law-makers are part of the system is futile. You cannot simply buy power in a market trade, just as you cannot buy trust. Power grows from networks, and is outside and above market mechanisms. When power rules more than the market, all manner of things can happen, and all manner of things are happening. "Capitalism" is a convenient banner for this activity - not only does it lend an air of "professional" legitimacy to such deeds, it also sows confusion amongst supporters and opponents alike.

But those that defend the system we have, simply because the people with power call it by a certain name, choose to ignore all of that.

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