Random stuff on ‘Capitalism’- WW

August 29, 2020


 

Aug 30- Random stuff on ‘Capitalism’

People who have been reading my posts (probably five including me) know that I bend towards liberalism. The kind of liberalism which supports individual liberty and organic growth. This kind of liberalism was labelled ‘capitalism’ by its adversaries and for some reason it stuck. I always feel that the term capitalism is a mischaracterization of what the system actually means. Sure, monetary capital is important but it is just one of the important aspects of the system completing the famous trinity including land and labour. 

A friend of mine shared a blue-ticked celebrity’s year old tweet about Capitalism. It read “I don’t know who needs to hear this but you are not a capitalist. You are a salaried employee working in an industry owned by an actual capitalist. People keep confusing simple commerce- which has always existed- with capitalism, a specific type of economy…

…. Folks swear up and down they are capitalists and don’t actually own anything. The people who have the power to repossess your belongings if you miss a payment are the true capitalist. You are a worker and a consumer trying to be in false class solidarity with billionaires”

There are two basic problems with this tweet and both of them are because of the mischaracterization of the system with the label ‘capitalism’. 

One, it asserts that ‘people keep confusing simple commerce- which has always existed- with capitalism’. Well, it's not quite true, is it?

This is the famous hockey stick graph which plots the wealth of the world throughout the years. It is quite clear that human wealth has increased dramatically with the emergence of liberalism in the 18th century. It is evident that the system did not always exist rather it was a culmination of intellectual effort to understand human behaviour.


What was new? The basic definition of the system encompasses three important entities- firms, private property and of course, markets. These entities stem from the basic ideas of freedom, liberty and voluntary cooperation. Of course imperialism and slavery played a major part in the growth story but it does not explain why growth started only post-liberalism eventhough slavery and imperialistic attitudes predate the system


All this must mean that the liberal order did not always exist. However the one thing that the tweet gets right is the fact that it is simple. Yes, the system started simple but it grew organically from the bottom and with it grew its complexities. There is no sane argument which advocates abolishment of the government and bats for absolute laissez faire. Sure, the market has failures. That does not mean the market system is a failure. For what it is worth, it has brought around three hundred million people out of poverty in India alone since 1991.


The second problem I have with the tweet is that it characterises a capitalist as someone who has the ‘power to repossess your belongings if you miss a payment’ and that if you deem yourself a capitalist, you are ‘trying to be in false class solidarity with billionaires’. I can understand that this tweet is supposed to be just rhetorical and that the tweeter wouldn’t have put much effort to make it flawless. But come on, it is a sunday evening and I do not have much else to do.


What is the problem here? Firstly, I would like to emphasize again that labels are quite misleading, because what does the term capitalist mean? Does it mean someone who invests money? Or someone who loans out money? Or does it denote the State? Because it would perfectly fit the context of the tweet. If it means someone who owns a business, well then, it is not quite clear. This is the problem with ill-defined labels. We do not quite know what we are dealing with.


But the second part of the tweet is quite clear. It asserts that if someone likes the liberal system then they are in a pseudo-bed with the billionaires. I will put my head out and say that this assertion is true but there is one caveat and one minor correction. The correction is that I do not think it is false solidarity, they are completely in bed with the billionaires. The caveat is that it applies only to ‘good’ billionaires.


Ugh! Another convenient label. What is a ‘good’ billionaire? Those are billionaires emerging outside what economists call “rent-seeking industries” (à la Ruchir Sharma). “These industries include construction, real estate, gambling, mining, steel, aluminum and other metals, oil, gas, and other commodity industries….They spend a lot of their time trying to win over regulators and politicians to secure ownership of a limited resource and the right to extract the maximum possible rent from that resource, by bribery if necessary”.


There is absolutely nothing wrong with individual persons or companies taking advantage of the market to provide valuable services to people and becoming billionaires in the process. In fact, more people should follow successful entrepreneurs and try to use the market to make their life better. Trying to make oneself better off is by no means immoral. Because as we know “It is not from the benevolence (kindness) of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest”- it is a net positive for the wider public that one wishes to make more money.


We in India have disdain for business people. Well, it is true that we might have more ‘bad’ billionaires given that the outgrown State pokes its nose on everything under the sun. But Indians become ‘bad’ not because they are immoral but because the State warrants it in order to become big. So if there should be disdain, it should be towards the Indian State.


We have strayed far from the tweet now, let me end this post by saying that India has a moral imperative to be more liberal. We have the most number of poor people in the world. Researches say that for every 1% growth in GDP, around two million people come out of poverty. Therefore it is imperative that we adopt more liberal values. Some people might clamour about the rising inequality in terms of wealth. I know it is a problem, but it is not a problem as severe as not being able to consume 2200 calories each day.

P.S:
[Video] I found this cool rap battle between Marx and Mises. I don’t know how I did not know about this earlier

[Video] & [Video] This one is better- Keynes vs Hayek


[Video] Ruchir Sharma ‘good’ and ‘bad’

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