Economics

The Future of Capitalism

Humans and other great apes share a common ancestor.

Somewhere between four and 13 million years ago, a spread we could fit a few thousand western civilizations in, our species branched out from the other modern great apes and became human.

Our genome is still 24/25ths the same. And so we spend a lot of time studying the other great apes to try to parse out that last 25th. The thought is that finding the behavioral delta is proof of what makes us human.

It turns out, we have a pretty good idea what it is.

It’s the shared understanding required for high levels of cooperation. Comparative Psychologist Michael Tomasello’s book Becoming Human: A Theory of Ontogeny explains the theory well.

Though it looks like apes and chimpanzees and bonobos and orangutans cooperate at a high level, they don’t. They use each other as tools to maximize individual benefit. If an activity takes two chimps, one views the other one the way we view a hammer. When they go on a group hunt, each participant goes to the space that they believe will yield the most likely outcome that they will make the kill and get the largest share of meat. If the best spot is taken, they understand that sharing the spot is worse than moving to the next best spot and occupying it by themselves.

The apes never really get that doing something for the greater good of the group, in and of itself, is a worthy endeavor. Because they aren’t capable of seeing the world through another’s eyes. This is something only humans do, as best as we can tell. It’s an ability we develop between two and three years old. Children with autism do it later or not at all. The inability to do it causes a tremendous disability.

Animals have equal or greater instinctual intelligence than humans. They have greater or equal spacial and physical intelligence. And machines can store many more times the data and make much better decisions than we can. It’s reason that makes us human. And there is no reason without the full world view that comes from shared understanding. Empathy and shared understanding are what makes us functionally human.

The ability to organize beyond our own needs and grow relationships and groups beyond our horizons is what has allowed us to dominate our environment. And so the notion that man’s natural state of being is one of boundless liberty and competition is not real. Nor is the notion that our best outcomes are achieved by the same means.

Unregulated competition is the domain of animals.

We humans require something else.

The running debate of what we do with our resources, as a society, is as old as tribes. And the notion of unequal distribution of those resources is as old as our ability to produce resources that allow us to live above subsistence. The ebb and flow of the value of capital and the value of labor isn’t something produced by the discovery of Adam Smith’s invisible hand.

Economic historian Walter Schiedel’s The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century paints a picture of a constant pattern, from the ancient Sumerians to the Chin Dynasty to modern day America and all stops in between, of long periods of peace and stability leading to increased economic inequality. Scheidel believes, and makes a strong case, that the only things that have ever curbed the progress of inequality are pretty dreary events; the four horseman of leveling: mass-mobilization warfare, transformative revolutions, state collapse, and catastrophic plagues. And so we should take a measured approach to stating that economic inequality is the great evil of our time. As it’s solutions tend to be far worse.

The last 50 years in America has seen the distance between the richest and the poorest among us grow. It has seen the concentration of wealth grow too. Consequently, a debate about the fate of the capitalism is upon us. And if Scheidel is correct, it’s important we have the right one, lest we rely on one of his four horseman to relieve us of our burdens.

There are some important things to get right if we’re going to have that debate though.

First, capitalism didn’t create economic inequality. Economic inequality comes from excess resources above subsistence. And it exists, and has existed, in every form of government and financial system.

Chen Liangyu, a communist party elite in China amassed a fortune of billions that would have put him near the top of Forbes list of the world’s richest by using the state positions he had to defraud state institutions. He did it for decades until reforms led to his arrest. Monarchies used titles and land rights. Empires used mercantilism. The church used religion.

Whatever avenue allowed for the amassing of wealth, we’ve found a way to manipulate it. Capitalism, more specifically the mechanisms and innovations that have enabled protection of property rights and the ability to pool resources for investment, has simply been the most efficient engine of abundance. And so blaming capitalism for inequality is a trope; presently a popular political one.

If we want to eliminate abundance, we should take aim at capitalism. If we aim to limit economic inequality, that’s another matter. One that will take some a-political thinking.

Contrary to popular opinion, the governing documents of America don’t call for any specific economic system. Nor would the Founders have been able to imagine the specifics of an economy that has traveled several innovations beyond the agricultural one that existed in their time. Instead, they set an original position from which citizens (narrowly defined at first) could benefit from the mutual advantages gained within a state that ensures access to life, liberty and pursuit of happiness. And they gave us the power through representative government to hold that state accountable to ensure it.

What’s evolved over the last quarter of a millennia has been a uniquely American story that mixed free markets, centrally managed banking functions, control over foreign trade, socialist investment and a nearly endless list of other characteristics that has made up the unique American economy.

Saying it needs to be left alone in the name of liberty is to misunderstand, fundamentally, what it is. Saying it is broken and that we ought to be more like Denmark to fix it is more of the same. It’s a bit like telling an Olympic weightlifter that to win more gold medals they should swim faster. Fast swimmers after all, win the most gold medals.

To get to Denmark, one need start in Denmark, an ethnically homogenous country with a population one third the size of the Los Angeles metropolitan area.

One question to ask ourselves is whether or not we think that the gap in resources between our most wealthy and our least is actually the problem. Materially, does it matter to someone in the lowest quartile how much someone in the highest quartile has? I suspect it does not. Nor is it something that’s particularly observable in daily life. What matters is how hard it is to be poor. And how difficult being poor makes it to not be poor. So, perhaps better questions are, how can we make the quality of life for the poorest among us better? And how can we make it easier for them not to be poor from one generation to the next?

There are some very obvious answers.

To the former: Daycare. Healthcare. Affordable housing.

To the latter: More high paying non-professional jobs.

Deciding to dive headlong into a tastes great/less filling screaming match about capitalism and socialism is where some part of our current political debate lies. A better way might be to try to start to discuss, in earnest, what to do with our excess societal resources. And to have that discussion from the position that accounts for the reality that, like trees, inequality doesn’t grow to the sky. Eventually something redistributes it.

It would be beneficial to pro-actively figure out how on our terms.

We are not apes whose best outcomes come from dominating each other. And our founding charter as an American people provides no limits on most questions of how we cooperate. It only demands that we do, within the constructs of a basic rule of law. And so perhaps it’s time we did again.

There are some ground rules though. Pointing to EU socialism as a panacea is dangerous. For one, it does not hold up well to the forces of immigration. And it does not provide for the economic dynamism Americans have relied on to move our future forward or to keep pace with the Chinese economic miracle. But it does clear out some space somewhere between them and us to ask a few good questions.

Here are mine:

What innovations do we need in our markets and tax code to account for an economy where 80% of corporate valuations are from intangible assets (assets that lack physical substance)?  Not long ago, that number was 20%. .

What problems would building affordable housing on a mass scale solve?

Same question for infrastructure.

Why don’t we have enough science jobs? (Hint: It’s because we don’t fund enough research…not because we don’t have enough scientists.)

Could a single payer healthcare system for the $3.7T healthcare market create an industrial complex similar to that of the one created by the $700B DOD budget?

Would that be bad or good?

Does an education system where a college education is the goal produce anything other than education spend and college graduates?

What would happen if we built a city of two million population capacity 100 miles west of Austin? Or ten of them in ten places just like it.

How come there’s not more nuclear power?

What other questions should we ask?

These are a good start. And though the answers are important, the point isn’t just the answers. The point is to shift the debate to what to do with our existing resources. And to stop the debate on who is worthy of resources.

And start behaving like humans again.

Categories: Economics

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7 replies »

  1. One of the things I like the most about your blog, Sean, is your good sense. In this essay I particularly enjoyed the four-horsemen idea of economic leveling; I’d not heard it put that way before, nor in quite that detail, and to me those are useful ideas as tools for thought. And the questions you ask are all good.

    I would propose another: in a world where less than 5% of the population (possibly as little as 1%) actually engages in what one might call (with more or less precision) STEM-related activities, and especially as those activities become increasingly less accessible in terms of complexity and extent, how is it possible to enable useful understanding of scientific and engineering concepts and capabilities among that portion of the population not equipped by education to understand them?

    As perspective, way too long ago I earned a degree in mathematics with a minor in physics. I try to keep up, as much as I can, but more often than not there are scientific papers whose very titles are incomprehensible to me. I see alienation via incomprehension as a very real problem in our society’s future.

    Liked by 1 person

  2. Sean, I read every post of yours and have for over a year now after finding you via Andy Stumpf’s podcast. I teach in elementary education, and share your frustrations regarding the state of our country’s education system. You pose a great question in the end of this blog about the problem with pushing students towards college degrees that summarizes my concerns.
    Keep up the great writing. I am really enjoying it!

    Like

  3. Sean, would that our current challenges be addressed by consideration of questions posed, such as yours. I am doubtful. Mostly, because such consideration cannot exist in a reality where our society ignores the systemic betrayal of both reason and the rule of law.

    Many of our problems might be solved if addressed from a position of humaneness. Regulated capitalism is great. Capitalism-run-amuck is not.

    — Why does our country reinforce the concept of race? I consider racial categorization to be an artificial construct designed from its inception to disguise crimes against humanity. Either a person is a citizen or not a citizen. In this division then, the concerns of government should be the maintenance of infrastructures necessary to life quality. We are in desperate need of discussions of what We, the People should expect from our government. Government should be focused on how many humans, for which it need provide services.

    — I think that wealth is criticized mostly because competition has been undermined such that only certain people have access to accumulating wealth. Most Americans do not require “lifestyles of the rich and famous.” Most Americans envision resources that are stable and secure.

    — The state of American education is the crux of it for me. We are denying the majority of our young access to contemplative lives. With all the accumulated knowledge about how human beings learn and how vast is each human’s potential, we starve, stifle, and undervalue learning.

    — How will we renew the concept of shared responsibility to serve the nation, without reviving a military draft?

    — How will we demand that our elected officials not allow our water and food supply to be jeopardized in the name of profit and greed?

    — Will America maintain the separation of church and state?

    And so forth and so on … Thank you, Sean, for starting this reflection.

    Liked by 1 person

  4. Cost per kilowatt is higher with nuclear power, compared with the other alternatives.

    Safety concerns. American leaders rely on fear-based reactionary policies, so every new disaster confirms the bias.

    Until you monetize nuclear waste, the waste stream half life is the end result problem with nuclear power. Shoving waste into a hole in the ground is not a good methodology and neither is dumping it into the oceans.

    Liked by 1 person

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