On Natural Capitalism
Capitalism has garnered much criticism over the years, which has resulted in thousands of papers and indepth studies across the world. Online many go to Twitter, Mastodon, and Facebook to rant about how capitalism is ruining the world. I would like to take a deeper look into this to truly figure out what is going on. Is capitalism truly destroying the world and ruining lives? If so, what are the alternatives to such a theory of the economy?
First, let me suggest that you, dear reader, go look at my analysis of the linguistic values of capitalism so that we are on the same page.
Capitalism is a fairly simple concept that relies on the affirmation that property exists and is able to be owned. The problem of ownership then comes in fairly quickly. One might ask, “how do I know what I own?” In this case the owner of an object must claim ownership and be able to make an argument for why they own the object. If you build a table, you have a just argument as to why you own that table. For thousands of years humanity has had an ever evolving code that attempts to discern ownership. For a time, everything that was made or created was said to belong to a king or ruling class. That was an implied contract between the rulers and the peasant classes. Over the years that code has changed so that now the product of your labor is your own. You own your labor. If you create something, you own it, assuming that you have not entered a contract with an employer in order to sell the product of your labor.
Before we go down that rabbit hole, let us focus on labor and productivity since that is the basis for value.
Labor & Productivity
Labor is simply an exertion of a person at a particular task. Productivity is the value that is exacted from that labor. Therefore, if a person labors in a workshop building tables, their productivity can be measured by how many tables they are able to build every day (or other objective measurement of time). Productivity is, therefore, variable from person to person since some people will produce more tables per day than other people. That means the labor of that more productive person is more valuable to themselves and/or their employer than others. As a result, they can exact more value for their labor than other people can.
If one person can only produce 1 table per day and another can produce 10 tables per day, the latter will gain more from their labor than the former. This is very basic. So why must I write these examples? Well, in my discussions with people online I have found that they seem to forget these basic principles of productivity when they make their arguments. So let's keep this basic model in mind as we go forward.
Why Does This Matter?
What does this all have to do with capitalism? The truth is, this simple model as I described above is the very essence of capitalism. Of course it is a little more complex than that, but not really. If you keep in mind that capitalism is simple the claim that you own your own labor and therefore you can exact value from the productivity of your labor. If you are less productive at a task, then perhaps you should try to learn and grow to become more productive. If you then feel like you have reached peak performance, then perhaps you have chosen the wrong vein of production in which to labor.
A common claim by the critics of capitalism is that “our lives should not depend upon productivity of the individual. We should work collectively for the betterment of everyone.” This claim is huge because it assumes a lot about human nature. Within this statement, there is a claim that such a collective mindset would work out in a positive way. It assumes that human beings can cast off the chains of individualism and selfishness. It assumes that no matter what everyone thinks of their compatriots as their equal in every way.
Read that last paragraph again. Such a short statement is so packed with so many assumptions. It would take years of study and hundreds of books simply to analyze these assumptions, much more so to validate them and figure out how to implement them. One more thing that it assumes is that a synthetic human construct can override an evolutionary construct. That is to say that capitalism was developed over thousands of years, slowly evolving to to state that it is in now at a base level. Capitalism only works according the the greater human psychology. It is a natural evolution of the human condition that is optimized for benefiting individuals to the greatest level possible. If it did not benefit the individual, then it would have evolved differently.
When you introduce force into the equation in order to change the current capitalist system, things can get messy. Let us take a look at what people are calling capitalism today. They look at the US economic system and call it capitalism. If you just take a glance in the general direction of the US economic system you will quickly see that it is not, in fact, capitalism in the very least. The US government places controls on capitalism in the form of taxation, regulation, and subsidies.
Capitalism itself only exists in its natural form when it is set apart from outside influence. When a government tries to use capitalism to its own ends, it no longer exists as capitalism because the basic foundations of capitalism cease to exist at that point. The end result of such a manipulation of capitalism tends toward chaos in the system.
For instance, the US governmet subsidizes the oil industry and the automakers industry to a very great extent. This increases the perceived monetary gain from productivity in this sector. Temporarily it will increase productivity in this sector as well. However, this is where the law of supply and demand must come into play. The US subsidies have incentivized the production of oil and automobiles without consideration for actual demand of those products. By actual demand, I mean, natural demand based on price and availability. In addition, the national highway system spurs false demand for the oil and automobile industries. This false demand creates what economists call a “bubble” in the economy where consumers are incentivized to use their labor to acquire something that they otherwise would not have acquired. This bubble in the economy is never sustainable because the displacement of productivity is taken from other sectors of the economy that may need it more at that given time.
As a secondary effect, oil supply has been incentivized to grow so that demand will artificially grow and therefore oil is overconsumed. In effect, the degradation of local ecology has been incentivized by the interruption of natural capitalism by the world governments. I will not contribute all of the degradation of the world's ecological health to governments, however it has greatly been impacted by the government's control of natural capitalism.
As an example, let's take the Dust Bowl from the 1930s in the US and Canada. The US government incentivized farmers in the Great Plains to grow more wheat and foodstuffs through subsidies and land grants and World War I created a massive demand for wheat. This was a false demand created by government action and it encouraged farmers in the West to over produce and eventually destabilize the local ecology, which in effect turned green and grassy prairie into dusty wasteland. If not for government incentives, the Dust Bowl would never have even been a footnote in any history book. Through natural capitalism without government force, the economy is, therefore, more decentralized and the cost of production is more spread out across a diversity of productive individuals.
As I mentioned in my article Discourse on a Decentralized Economy, what I have seen in history is that centralization of coercive power tends to be more chaotic and destructive as an end result. From what I have noticed in history is that the more decentralized and individualized an economic structure is, the more stable and sane it tends to be. Natural capitalism always seems to tend toward a more decentralized form. Every time a cartel has risen up, it tends to fail very quickly.
In the late 1800s, a few cartels attempted to rise up and corner a particular market. What economists have learned from this phenomenon is that when corporations cartelize, they do it in order to attempt to manipulate the laws of supply and demand. If there is one thing that the market has almost no tolerance for is when people attempt to manipulate its laws and the cartel will tumble down and be replaced with a diversity of companies and individuals filling the supply chain and demand needs. However, there is one way to make a cartel work temporarily; that is through the creation of monopolies. The only way a monopoly appears to have the capacity to exist is through coercive force imposed by government action.
When Union Pacific and Central Pacific embarked on their 2000 mile journey across the mountains and plains of the US, they did so at the behest of the US government. They worked to build the Transcontinental Railroad with government subsidies. These subsidies were not the only empowerments given to these companies by the government. These companies also received special priveleges and land grants that other, smaller railroads had no access to. Eventually these actions lead to a virtual cartel/monopoly created by government incentives and false demand. False demand forced the creation of a temporary boom in productivity and trickled out to a multitude of companies, such as the steel industry. A single government action led to the propping up of a select few companies who could immediately out-produce their competition and gain virtual dominance in their particular industry. As a result, these tycoons became heavily involved in politics to help keep the false demand and productivity flowing to their pockets.
If you will notice, all of the evil of this cartelization of a corporation can be derived from government action in a natural capitalist economy. Without the government taxing the populace in order to benefit the corporations of their choice, there never would have been a disruption in the economy, and it is easy to abstract this to an event that changed the path of US history forever.
2 wars and a few decades of massive government involvement in the natural economy resulted with an even more massive market correction. It was deemed “The Great Depression”. The Great Depression was the culmination of so many government actions that it would take a couple of books to explain them all. One of these events was the cartelization of the railroads and steel industry. Another was the creation of a central bank called The Federal Reserve. Yet another event that contributed to the massive downturn in the US economy was World War I. All of these events were government action that artificially creating demand where little or no demand previously existed.
As a reminder, demand is simply a sector of the economy where there exists a want or need for a certain kind of productivity. There is natural demand where individuals actually need something like clothes or food, then there is artificial demand where an outside force does demands, let's say, a railroad across the country that would perhaps be nice, but not something that there is sufficiently enough demand for at the moment. I will leave this point here, although I could write an entire essay on the effects and problems with artificially created demand.
For now, this is the end of my first essay On Capitalism. Next we will go into more depth on the history and effects of natural capitalism.