Can Capitalism Survive?
I've lived in a benign capitalist country all my life. Benign for me that is. When I was young I was a bit of an activist. I worked with people in our local black ghetto and knew that racism was alive and well in Saint John. But for me, life was pretty good. Work was easy to find. In those days I could hitch-hike into a strange city and find a job the next day. After a friendly stranger offered me a place to sleep for the night.
The people I knew all assumed that capitalism would collapse at any moment. It was too racist and sexist to survive. Hah - turned out that capitalism thrives on racism and sexism. And so - 50 years down the road - capitalism has become trumpism.
Let me be plain - I understand how capitalism works. The core idea is that people with surplus funds invest those funds to build productive operations. For instance, pins are pretty hard to make. If I knew what I was doing I might be able to make a couple a day on my own. But if you set up a factory that organizes the labor of many people and provides them with tools then each worker can produce thousands of pins a day. And it takes capital to set up factories like that. Capital to build the building and buy the machines and hire the workers and the people who sell pins. A society that enables that sort of thing will prosper. I've lived with that prosperity all my life. But that prosperity had a dark side. While the capitalists got richer and richer to a fabulous extent, the rest of us were struggling.
Capitalism presents itself as rich people investing in productive resources.
But that is old fashioned. Now capitalism is people buying stocks in a stock market (simplifying here) from a company that proposes to build productive resources.
Seems like a small change - but it isn't.
Say I want to set up a bike shop. I do my business plan and find I need $1000 to do it. I only have $100 To raise money I sell 'shares' in my bike shop. Say 9 shares for $100 each.
Each share would entitle the owner to a share of the profit from the bike shop
Owners of shares might want to sell their shares.
That's what stock markets are for.
As you might expect, shares in companies that produce handsome profits might sell for more than their original purchase price.
So far so good.
But that enables people who can profit just by buying and selling stocks.
Let us be clear here - the initial public offering of a stock does good by providing capital to a company to build a productive resource. Subsequent trades of the stock do the company no good directly. Those trades have become a speculative medium.
I think of playing the stock market as akin to gambling. But it's gambling like playing bridge rather than gambling like rolling dice. And some people get very very rich by gambling on stocks And other people get very very rich by advising others on which stocks to gamble on (and by taking a cut of each trade) We see the outcome - a few people 'owning' almost all the wealth.
But other forces are at work too.
Automation has meant that there are fewer and fewer good jobs. In a society where you need a good job to mate and have a family; that's a problem. Capitalism promises maximum prosperity. It doesn't talk about how that can make most people poorer while a few get fabulously rich.
And the pandemic has revealed that the old common wisdom was basically lies. In fact, we can just send people home from work and pay them anyway. Because in fact a government can make money as it needs And in that context who needs capitalists? If you need capital to start a productive enterprise, if you have a dynamite business plan, why not just take it to the government for funding.
What do you think?