Rebranding capitalism
January 5th, 2010 by Mark Bahnisch | Published in Economics, Language, Markets, Politics | 46 Comments
There’s an interesting link in a recent post by John Quiggin; discussion among folks he terms market liberals about eschewing the term ‘capitalism’. I can well remember when it came back into fashion as a descriptor beloved of triumphalist neo-liberals, and I think Quiggin is spot on with these observations:
It seems pretty clear that these developments are related to the global financial crisis and related events. The adoption as a badge of pride by Forbes magazine and others of the previously pejorative term “capitalism” was one of the most extreme manifestations of market liberal triumphalism in the 1990s. But, in the wake of the crisis, “capitalism” is a much more problematic term. It works well enough as a generic term covering all advanced economies in which private capital plays a leading role, but one that is, as we have seen, ultimately dependent on government action for sustainability. We can then say that the relatively unregulated, finance-dominated form of capitalism that has held sway for the last 30 years is being supplanted by a different form in which the role of government as ultimate risk manager is more direct and obvious. But this has little rhetorical value for market liberals.
We could rebrand capitalism as “invisible hand-waving”, I suppose …
If the ‘corporate state’ was said to be directed by a troika of capital, labor and govt,…..
is the current disposition instead a duopoly of finance capital and govt/taxpayers?
I think this Quiggin chap must be an economist, and I don’t mind using terminology from economics to describe an economic system.
“We could rebrand capitalism as “invisible hand-waving”, I suppose …”
Nah, I reckon it’s about getting back to basics. Capitalism is a superb algorithm for creating and distributing wealth. That is if you genuinely risk your own financial, IP or sweat capital in creating something. Instead of mosquitoes sucking at an artificially created bubble.
Carnegie not Enron.
Disclaimer: I first read the Gormenghast trilogy ‘cos a third world Carnegie-funded library stocked the books.
Actually the big problem with capitalism now is that it’s most fervent ideologues treat it as an… well…ideology rather than one of several tools for making life better.
They should hire the guy who turned “global warming” into “climate change”
I disagree with this. Every advanced economy has operated as a mixed economy over the past three decades. The average size of OECD governments has not decreased over this period. In almost every country governments are heavily involved in the regulation of communications, ports, transportation, finance, international trade, housing, education, health, etc. In most OECD countries, public ownership remains important in many of those sectors. Market liberals do not shy away from the term capitalism at all. Most market liberals (as opposed to libertarians) accept that markets can fail in important areas and that those market failures can be overcome by effective regulations. They also understand though that government interventions can be badly designed and fail to achieve their stated goals. This means that markets need to be evaluated on a case-by-case basis.
If I compare Australia circa 1980 with the Australia of 2010 I feel quite comfortable in claiming that the broad set of market oriented reforms implemented over that time have lifted average living standards enormously and helped to improve labour market outcomes as well.
Markets versus government is a false dichotomy. It is always markets and government. The important questions revolve around the precise role of governments – producers, regulators, enablers, redistributors? In Australia, as everywhere, governments will play all 4 roles, but in different ways in different parts of the economy.
Where the GFC has been important however is to push those that had advocated reducing the role of governments in each of those four areas on to the back foot politically and intellectually. The scope for government action has expanded. It remains to be seen whether governments will use this enlarged scope effectively.
I was going to link to that in the other thread, Mark! You’re one step ahead at the moment ;)
Also, welcome back, Nabs
The real problem is not the term, its the f’n system itself. The argument isnt about semantics (except to corporate scum). On a global scale capitalism (or whatever u want to call it) is a complete and utter FAILURE. Judging by the distribution of wealth across the globe, it scores a very disappointing 20%. Where’s Solon when u need him?
“On a global scale capitalism (or whatever u want to call it) is a complete and utter FAILURE. Judging by the distribution of wealth across the globe, it scores a very disappointing 20%.”
Oh pshaw! Capitalism (when done properly) creates wealth. You can’t distribute what’s not there.
Frankly DBValentine, yer coming across as much of a ideologue as those Wall Street boosters.
We wouldn’t be having this conversation now if wasn’t for a evolving mixed economy that combined public sector investment in creating the web with private sector risk taking that created this blog template.
Hmm…
“with private sector risk taking that created this blog template.”
Private sector risk taking that created the bloody desktop/laptop you’re now using to debate this issue.
Even though Bill Gates, Paul Allen, Steve Jobs et al are basically ruthless industrial barons, they still achieved like Ford, Carnegie etc their goal of making money out of selling people at a good price a technology which enhanced lives, boosted productivity and got more people laid.
Never been laid on a laptop.
Though, seriously, capitalism has a bad name and justly so. For the most part, wealth is distributed upward, out of the labour of the poor. Its no accident that in Australia, 75% of people don’t like their jobs, and 10% positively hate them. Salaries of corporative executives are 10 times that of the ordinary worker, but it was the corporative executive who cheerfully destroyed the world economy. As a system, its broke, and right now, I don’t see governments doing anything to fix it. The medicine needed, redistribution of wealth to a greater extent to the creators of labour, is too radical for capitalist speculators and most governments wouldn’t have the guts to do it anyway. I mean, look at the fuss over the new Fair Work system, or the uproar every time the union movement suggests the low paid gets a fairer share of the cake.
“Though, seriously, capitalism has a bad name and justly so.”
OFF Paul, you’ve missed the point too as well. Capitalism is neutral. In fact it shouldn’t be an “ism” at all. It’s just a system the way electricity is.
You’ll find its basic tenets everywhere. You can get it running a milkbar. You can get it patenting a new idea. Matter of fact I’ve got it right now.
My point is that the name but not concept of capitalism has been totally hijacked by the worst of corporatism which at it’s worst combines the worst of all “isms” – especially the socialisation of loss and the privatisation of gain. Exhibit A. Bailing out all those financial bodies that fucked up from making bad bets.
True capitalism would jus’ let ‘em drown while clearing the decks for the next generation.
Instead of which we’ve ended up with G20 Governments around the world paying lip service to the market while practicing socialism for the rich.
True capitalism would sit down with the unions and say “right, how can we all get richer”:.
Ummm.. sorta lost my train of thought as my neighbour’s cat has now crashed my place and is demanding major attention. Bit like a MGM starlet back when Louis B Mayer actually ran the place.
Nabs,
I’m still struggling through Adam Smith’s Wealth of Nations. (I have both volumes and have been trying to read it for two years, on and off.) I get what you’re saying about it being a system; but it has also become an ideology identified (by the Americans at least) with modern democracy. China of course, disproves that idea. Nevertheless, there is definitely an ideological connection with western democracy arising out of the Enlightenment (unsurprisingly, since capitalism itself is a creation of the Scottish Enlightenment).
Is it a friendly cat, or does it think the fridge is God?
“Is it a friendly cat, or does it think the fridge is God?”
We’re into a transaction that even that dour Scot Adam Smith would approve of.
I give her milk and she stops pestering me.
Actually I doubt Adam Smith was that dour. He did spend some time partying on in Paris with that noted bon vivant Benjamin Franklin.
Where he probably first felt the grasp of the invisible hand when Ben was introducing him to the demimondaines of Montmartre.
Incidentally, the French term (I can’t be arsed looking it up now) for the Scots back then could be loosely translated as “the dames from hell”.
Which they were until the Brits mowed their arse at Culloden.
D.B. Valentines comment @ 8 is why I keep coming back to LP for my daily WTF moment. This comment is so inane you really have to wonder if this guy *ever* bothers to read anything other than the Green Left Weakly. Here is a small counter to this stupidity – from the NYT no less.
D.B. Valentines focus on wealth distribution is also mistaken. Even in our own family we are wealthier than some of our friends who earn twice as much. They choose to blow it while we invest and gradually increase our wealth. The worlds populations are also getting older and older people naturally have more wealth than younger ones. There are many more reasons as well.
D.B. Valentines tirade is born of jealousy, nothing else.
Nabakov @ 14,
Not just in Paris, Nabs. Apparrently in the 1760s Edinburgh was well set to put in a bid for the party capital of the world. Smith belonged to a select group known as The Select Society. It kick-started the Scottish Enlightenment (of which contemporary Englishmen were completely ignorant.) Apart from its propagation of ideas over an incredibly wide field, it was renowned for members’ ability to down copious amounts of claret.
mark said:
The problem with discussions about “capitalism” is that the term covers a multitude of sins and saving graces. With defenders and deriders often hopping from one meaning to another, according to political convenience.
The term “capitalism” can be applied to a variety of institutional formats, not to mention individual contents. The key distinction in the context of the GFC is between industrial capitalism and financial capitalism.
The phrase “industrial capitalism” deals with the production of real goods (generally good). Whilst “financial capitalism” which deals with the distribution of nominal titles (generally bad). The industrial-financial distinction roughly parallels the Marxist distinction between production/distribution for use and production/distribution for exchange.
I have been banging on about this crucial distinction since the late nineties, LTCM days. In fact I was the first person on the blogosphere to
coin the term “financialisation”. But still one sees pointless uses of the vague abstraction “capitalism” without any modifiers.
Left-liberals like to smear capitalism as a whole with the vices of financial capitalism. Right-liberals want to extol the whole of capitalism with the virtues of industrial capitalism. Both are wrong, they are playing ideological bait-and-switch games.
It hardly needs to be emphasized that “financial capitalism” – the appropriation of the gains from industrial capitalism by a horde of locust-like lawyers, bankers and bean-counting pixel shufflers – has been utterly discredited by the GFC. But “industrial capitalism” – the provision of goods by distributed intelligence proprietorships – is still as useful as ever, witness iPhone!
This view is not exactly limited to idiosyncratic bloggers. It is also the view of the world’s best businessman. Warren Buffet said, in relation to dot.com,:
Comparing capitalism’s appreciation from the late nineties through to late noughties:
“Success has a thousand fathers, failure is an orphan.”
JFK
Unless I am giving a “Wet” a well-deserved thwacking I don’t think there is much point in Manichean ideological schematisation. No doubt there are polarities at the end of every spectrum. But most of the interesting action is in-between. Therefore I don’t see much value in setting up an ideological bogey man like “capitalism”, or “socialism” for that matter, in order to frighten the children.
Thats why I call myself a social-democrat, which is a polite word for an ideological tart always looking for a more comfortable lap to hop onto. Capitalism and socialism are just institutional rules (comparable to instrumental tools) which individuals, in their capacity as shareholders or voters, adopt or abort according to circumstance.
My favourite quote on the great ideological schism came from Deng Xiaoping, who was refreshingly pragmatic about policy:
Interesting that Deng’s view on ideology almost exactly paralleled Einstein’s scandalous views on epistemology:
If the 20thC’s world’s greatest doer and greatest thinker both agree on the value of pragmatism then I think they are onto something.
Lord help us.
“Financial capitalism” has been with us lo these many years, and in many parts it’s known (or at least partly known, or at least in its less shifty incarnations) as “arbitrage”. It’s not new, tho’ whether that makes it palatable is a different conversation. Also as usual here, are equations which omit mass immigration and its fully predictable consequences as a key variable… equals HILARIOUS FAIL.
What’s in the water over there? Lately it seems to me that LP at large is kind of… (how shall I put this politely?)… underperforming.
Cue Saint Tom on “Little Johnny Jewel”:
“and then…
He loses his senses.”
What follows is of course electric guitar poetry, but nobody would mistake it for sensible discourse.
Here’s some salts. You might like to smell them.
I think all cats believe the fridge is a god, Paul, while we humans are merely low-level priests in the service of the fridge god (and the cat, of course).
Mine certainly do.
DI (nr) @ 22m
Which makes them very contented moggies I would assume.
(The things one remembers when in the throes of insomnia. I had forgotten the possibility that capitalist theory could well have evolved in a haze of claret – but then again, in eighteenth century Britain almost everything occurred in a haze of claret or port. I’m a port man myself.)
(Or gin and small beer if you belonged to the lower orders.)
Yeah, they seem reasonably happy with life. This morning when I left, Bruce was taking her ease on my bed (she got up briefly for breakfast, and again for the promise of ham fat while I was making my lunch) and Mr Snuggles was whinging quietly from the living room. (He’s quite elderly and suffers a bit from arthritis, I think.) He shut up briefly when I patted him.
Actually, I’m rather fond of port myself, Paul, but I haven’t had much occassion to drink it lately. A (decanted) half bottle is a bit much to close out the evening, particularly if you’ve already had a fair whack of claret (and a couple of cooking beers).
Guess I wouldn’t have made a very good philosopher of capitalism.
“True capitalism would jus’ let ‘em drown while clearing the decks for the next generation.”
Maybe that bendover support was just a small blip in the scheme of things. An aberration that will be corrected as “true capitalism” does the bastards slowly.
You know, when governments have lost the capacity to protect their pals.
j_p_z@#21 Jan 6th, 2010 at 10:27 am
Its a mistake to identify financial capitalism with arbitrage. The latter process is usually based on some identifiable good, and leads to a uniformity and stabiliation of price throughout the market. Finance capitalism is more often derived from a completely fictitious good (CDOs) and leads to massive price volatility, inflation and then deflation.
With arbitrage both sides get something of value with the middleman taking a relatively small cut. With financial capitalism Ponzi schemes its the financial middleman that gets the lions share with investors and tax-payers getting fleeced.
True enough, financial capitalism has been a major feature of institutional capitalism since the late 18thC. It made its headline debut with the Rothschilds financing of the British war effort against Napoleon. Auspicious beginnings.
Its been on some roller coaster rides since then, notably 1890s and 1920s. (These bubble-busts were both followed by prolonged depressions – surprise surprise.) So we had Roosevelt I trust busters in the 1900s and Roosevelt II in the 1930s.
Now this money-go-round is starting to cost us all big time. The share of GDP going to the financial class has skyrocketed over the past 30 years. Quiggin estimates that nearly 1/5 of GDP goes to pecuniary pixel shufflers:
I have no specific figures on the average size of the financial sector in the US for the post-WWII (1940-75) era. But my guess it would have been no more than 1/3 of this, going by the staggering growth in MBA’s alone. So we are looking at an almighty shift (~ 10%) in the composition of output and the distribution of income. Most of it, IMHO, completely wasted on plutocratic churn.
And dont get me started on financial capitalism’s most notorious victim: post-Soviet Russia. This is the logic of casino capitalism taken to its extreme, where an entire economy was “put into play” with about a dozen guys ending up with all the marbles at the end of the (rigged) game.
This Ponzi scheme caused massive social disintegration and demographic collapse on a scale sadly precedented by Stalin-Hitler. With Russian men turning to intoxication and Russian women forced into prostitution. No one sees this or cares because it is liberalism, individual choice so everything is alright.
In some ways the hypertrophy of the New Right’s wealthfare state corresponds with the contemporaneous hypertrophy of the New Left’s welfare state. But at least welfare state bureaucratic churn went some way towards alleviating social distress and accumulating human capital.
What we have to show for all the billions thrown at the Big End of Town over the past decade or so is mainly over-sized yachts, under-occupied mansions and legions of whores, dopers and hangers on (“entourage”).
God I despise post-modern liberalism.
Cue St Tom on Marquee Moon:
John Harrison @5 …
who was that again?
Strocchi @#27: Well I gotta hand it to JS for an artful riposte. But I’d submit that the topic is large enuf for me to say he makes some excellent points, whilst not feeling obliged to retract my own. There’s a few other insights one might offer, esp about Russia… but too bad, I just don’t have enuf Red Bull in me at present.
Excellent deployment of St. Tom, btw. Heck, I guess this case isn’t closed after all. 8-)
@28 – American political consultant employed by the Republicans. Can’t remember his name – he was out here in 07 and did a televised focus group on the ABC, as I recall. I think the term was coined in about 1995 from memory, but that could be wrong.
Frank Luntz:
http://www.desmogblog.com/bushs-chief-climate-spinmaster-tells-harper-how-its-done
That’s a lovely thought Mark but it just isn’t so.
For ten points:
a) What does the initialism UNFCCC stand for?
b) When was it set up?
c) When did Frank Luntz make his observations?
d) What does this say about his causal relationship to the term climate change?
Point taken, Fran.
But the UNFCCC process wasn’t widely known or discussed until quite recently. Climate change didn’t come on the political agenda until the mid 2000s in any real way. In public discourse prior to that, ‘global warming’ was the most used term. Luntz gave his advice to the Bush administration in 2002.
http://en.wikipedia.org/wiki/Frank_Luntz#Global_warming
I think the distinction here is the use of a technical term, and the shift in political/public language.
The intent was certainly there to defang it and make it sound more ‘neutral’; it opened up the field for those who want to claim climate change is natural, etc. Luntz has been quite open and upfront about what his intentions were.
That’s doubtless the case Mark, but I am more than a little tired of hearing this trope that those of us who support mitigation tried to re-engineer the term as an afterthought to cover “global cooling”.
For the record, in 1991 I recall a common term being “Enhanced Greenhouse Effect” (used in a geography text at the time (GeoActive IIRC) to distinguish the warmth that was simply a consequence of Earth’s atmospheric composition from that being forced by added greenhouse gases.
The Luntz reference actually fits the denier trope on spinning the message, and once again it underlines my point that the agnotologists are projecting their practices onto us.
Though oddly enough delusionists have since claimed that the use of “climate change” instead of GW is all part of the conspiracy. Can’t remember how that’s supposed to work, but to a delusionist everthing always fits.
PrQ …
Cherrypick carefully, ignore contrary data, make outlandish inferences based on nothing more than supposition …. for the filth merchant agnotologists, it’s not hard.
Particularly difficult since the IPCC dates to 1988 (where CC stands for climate change).
@34 – Fran, that’s not what I’m talking about. I’m talking about a Republican attempt to muddy the waters. Perhaps we’re at cross purposes here.
Mark@38
We definitely are at cross-purposes if you thought I was taking a swing at you. It never occurred to me that you would have been making such claims. The claim you initially made was one with which I was familiar and is commonly raised on my side of the argument.
I was merely adding further context to my response.
Sorry, Fran, I’ve got the flu and a bronchial infection and my mind is not very sharp at the moment!
Mark, despite the heat, rug up well and drink lots of whiskey. It won’t help the mental sharpness, but you won’t care. Oh, and keep your fluids up.
The word ‘capitalism’ was first used in English by William Makepeace Thackeray in 1854 in his novel, The Newcomes, chapter XLIII. He was talking about the business, mainly financial, affairs of some of his characters. He also used the word “capitalist” several times, though this word was first used in English in the 1790s (in French, capitaliste, was used earlier in the 1760s – I am writing from memory just here).
The word ‘capitalism’ was not used by Adam Smith (he died in 1790), nor by Ricardo, Malthus, Mill, nor, interestingly, by Marx.
Adam Smith referred to his ‘4th Age of Man’ as commerce, the earlier three being “1st, the Age of Hunters; 2dly, the Age of Shepherds; 3dly, the Age of Agricluture” (A. Smith, Lectures on Jurisprudence, p 14, [1762-63]).
@41, thanks, David. I have penicillin from the doctor. Sadly, I don’t think it’s the best mixer for scotch!
Enough scotch will cut through anything, Mark.
Don’t forget to get some live yoghurt into you as well. Antibiotics play merry hell with your gut bacteria.
Got some of that, thanks, David!
Jack Strocchi, I think you have just about summed up the problem:
@ 19: “It hardly needs to be emphasized that “financial capitalism” – the appropriation of the gains from industrial capitalism by a horde of locust-like lawyers, bankers and bean-counting pixel shufflers – has been utterly discredited by the GFC.”
“But “industrial capitalism” – the provision of goods by distributed intelligence proprietorships – is still as useful as ever, witness iPhone!”
@ 27: “With financial capitalism Ponzi schemes its the financial middleman that gets the lions share with investors and tax-payers getting fleeced…”
“I have no specific figures on the average size of the financial sector in the US for the post-WWII (1940-75) era. But my guess it would have been no more than 1/3 of this…”
It is hard to believe the blindness of thinking that national wealth can be created by an economy full of rent-takers, unless they are taking their rents from other nations…
It reminds me of the poor maggot-infested dogs in Indonesia. The maggots probably live a life of idle luxury, until there are too many of them and the poor dog dies. Then they are stuffed. Unless they can find a new dog.