Capitalism Afterthought III

Christopher Hitchens has some thoughts about Marx vis a vis the current crisis. He points out Marx' distinction between finance capital and industrial capital that I was struggling to articulate in my first post on the topic.

Capitalism Afterthought II

In light of reading After Virtue, I might refine my last post by saying that I hope a virtuous strain of capitalism becomes ascendant. Its application would be business conducted in a more virtuous manner.

I don't mean this in a "do-gooder" sense, but in MacIntyre's Aristotelian sense. This means honesty, courage, integrity, generosity. It means doing things with excellence, in accord with the best practices of business, as a basis for success, rather than greed.

Capitalism Afterthought

Since my last post, I've read The Ascent of Money, by Niall Ferguson. It gives a great description of the development of the financial system. It turns out that early in the history of stock markets, there was an event called the Mississippi Scheme. It was one of the first examples of the kind of bubbles we've seen recently with mortgages and 10 years ago with the "dot com" companies. It also can be considered a failure of centralized economic planning!

I would like to add that my previous remarks about what capitalism ought to be were reflective of a capitalism based on more of a Puritan/Calvinist ethic. Capitalism can have an ethical base or an unethical base. Hopefully the unethical type has negated itself!

With regard to the bailouts and stimulus package that have been passed since then, I have no idea if they will work. Hopefully investors will buy the "troubled" assets and be able to do something good with them. I'd rather government spend less than more, and it appears that people have lost a lot of trust in government, Barack Obama's election notwithstanding. Trust in government or lack thereof says nothing about its competence, necessarily, but we know what happens when government spends more money, especially if it prints it - inflation. Everybody loses then.

The Negation of Capitalism?

Lately I've been reading Makers of the Modern Mind by Thomas P. Neill. In his section on Marx, he explains Marx's dialectic in terms of negation. For example, a system (thesis) will negate itself (antithesis). Then, a new system (synthesis) will emerge. In this fashion, capitalism will negate itself, and socialism will emerge. Socialism will negate itself, and the result will be communism, the dictatorship of the proletariat, etc.

This appears to be exactly what's happening in the current financial meltdown. Our economic system is negating itself. Just to be safe, I went to Merriam-Webster's for the definitions of negate:

1 : to deny the existence or truth of
2 : to cause to be ineffective or invalid

Looks pretty much like what's happening now!

Perhaps I also need to consult Adam Smith and more Marx for more information, but I'm going to stick my neck out a bit.

Is securities speculation part of capitalism as they understood it?

How much of the current situation is due to the status of any means of production, as Marx understood them?

Capitalism, according to M-W:

an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market

In securities speculation, people do own shares of companies, or debt obligations of companies. They can also own anything from futures to any sort of derivative.

But are the speculators interested in what the company's actually does, or are they more interested in turning their securities over at a profit?

My take is that a capitalist is someone who has an interest in an enterprise for the purpose of making money through the enterprise actually doing something. In my mind, the enterprise comes first, moneymaking comes second.

Now, the moneymaking has come first, apparently, sometimes to the detriment of the enterprises (GM, Ford, Chrysler, the various failed banks, AIG, for example). This is also evident with income trusts; a company is set up to produce income. Of course, but what about the business? Seems like putting the cart before the horse.

Here I am showing my knowledge gap. This is more of an impressionistic reading of the issues.

However, if capitalism is more about ownership of capital goods, which implies a more than cursory interest in them, then can a shift to "profits first" be considered a negation of what capitalism is about? Or is it that capitalism has evolved from concerning itself with capital goods to concerning itself with financial foo-foo dust?

Ars Gratia Artis

I once thought I'd be a great painter, but found that this was a pigment of my imagination.

Financial Meltdown

Seeing all the losses in the financial markets this week made me hope for something.

I hope that people at all levels of the game become more responsible.

What do I mean by "responsible"? I will illustrate with some examples of irresponsibility: selling sub-prime mortgages that many people wouldn't be able to afford; creating, selling, and buying the securities backed up by these types of mortgages; the government not regulating or outlawing these kinds of mortgages & securities; buying a house one cannot afford, except if the housing market stays hot.

It's like there was a collective notion of, "Hey, we shouldn't be doing this, but it looks like it's working, and nobody is telling us we can't, so let's go with it for as long as we can. Maybe somehow it'll all work out." Perhaps in the future our financial system will be more prudent.

There is no free lunch after all - everybody ends up paying, unless you are really good at trading stocks, bonds, funds, derivatives, etc., got out when the getting was good, have a golden parachute from the investment bank you helped run into the ground, or have had your money in fixed rate CDs/GICs (or in a mattress) all these years.

Military Advice

If one is battling the Russian Air Force, it is best to be under no Ilyushins.