Old Capitalism is Dead, Long Live New Capitalism

Old Capitalism is sick and dying, his politics and his concerns are out of touch with today. New Capitalism, common people hope, will be kinder, more ‘compassionate’

and gentler in pursuing its agendas.

The politics of the New king are crucial since the eternal Queen, bountiful Earth is sputtering with exhaustion. New Capitalism has to do ‘something’ about Mother Earth’s illness (es) as well as those billions of deprived souls both rich and poor, who did not benefit from Old Capitalism

What is this conflict about? What is the background, who are the protagonists and who can write the coming twist in the drama of post modernity?

When ‘they’ the Walmarts, replaced the family business, some writhed, some cried but we all let it happen because, we felt richer when we bought a $2 item from Walmart that elsewhere cost $20. We had just imported poverty from China, Thailand, Taiwan, Malaysia, Brazil, Korea or Japan and exported back prosperity. In a way, North America, UK, Europe and Australia had supported these poorer economies in return for goods that they needed. It was a fair exchange, making the rich richer and poor richer too. So, what’s wrong? There are a few complex footnotes to this fair exchange that don’t usually make it to the top of our conscious mind. Assuming that the poorer economy in question is completely export dependent; the two dollars that go back is spent as follows:

Of the $2.00 you spend, 25% is mark-up over the cost of the item. Wal-Mart’s profit margin is extremely low around 1-2%, however overheads and other costs of doing business take care of the rest.

Ok so from a $1.75, how much actually goes to the country in question and what does that country do with the funds?

1. 30% defense purchasing and salaries
2. 30% investment and consumption
3. 40% loan interest

70%, depending on who you consult, goes right back out of the poorer economies—especially the ones who are highly externally dependent. This is outrageous, but wait, the amount that leaves the country in case of bank loans for developmental projects is 90%.

Even then, most people would argue that capitalism is the means to getting richer for development economies. They would cite examples of China, India, Taiwan, South Korea, Indonesia and Japan. Why is the glass half-full for them and half-empty for others?

Trade Is Not Capitalism, Free Trade Is.

Most people confuse capitalism with trade. Trade, any kind of trade, impacts utility positively. If I want a cow, but have a house and you have a cow and want a house, our best bet is to exchange them. Even if it seems unfair that a cow is worth an entire house, it is fair in terms of the law of demand and supply. I don’t ‘like’ it though. It makes one feel uncomfortable. It is this irrational discomfort, this slight revulsion from selfishness, a ‘niceness’, an altruistic instinct that compels some to say foul. Others think it is fair because a man who wanted a cow got a cow and is better off vs. a man who did not want it.

Many compelling economic decisions are similar to the house vs. cow decision. Even though a house does not provide a stream of revenue it is something that people feel they absolutely need. A house is basic infrastructure. The development expenditure that poorer economies make is ostensibly for houses rather than cows.

What must be clarified is that it is not that is sabotaging poorer economies. What is sabotaging the poorer economies is the unequal balance of power in setting the ground rules of trade. ‘Free trade’ is a misnomer in a world with unequal exchange rates, where everyone wants the same technology, when the newest ideas always come from few places and where unequal freedoms is the norm rather than the exception. (And no, that doesn’t mean that every country must be technically a democracy to have freedom).

Regional vs. Global

It is easier to trade globally rather than to trade regionally, inspite of the inherent biases in the global trading system.

Why does the less developed world join WTO whereas SAFTA (South Asian Free Trade Agreement) that was to be signed by 1st Jan 2006 is still languishing?

Enter the cynical reality. Regional neighbours just don’t get along. Look at the sub-continent and South Asia, each country is busy protecting its identity. Each is competing on race, lineage and religion. Even though each country can hypothetically co-operate, drop their arms races cold, dismember their nuclear weapons, create a trading bloc and just be ‘nice’ to each other, a few years ago Pakistan and India didn’t even see this as a remote possibility.

Today, each is afraid that the other will somehow cheat, get richer or do better than their economy. It is easier to be dominated by the gora than the neighbour.

Therefore, instead of transforming the system to hyper capitalism, our best bet would be to adjust the present global system in line with Leftist concerns. There just isn’t any other workable alternative other than dependency on the developed world.

Piggy back us some more, America.

The organized Left seems to have just upped and died after communism took over part of the world and corrupted into a fascist regime. Today, the world’s most influential thinkers operate on the principal belief that the global world’s most workable solution is Capitalism. In the spirit of compromise, Joseph Heath, an Economics philosopher has proposed an Ameliorative Left versus a Transformative Left (2003/2005). Others recently have spoken about compassionate capitalism (in the hope that a little sentiment will go a long way).

Joseph Heath bases this on a values and priorities argument for capitalism. In his best-selling book of 2003, ‘The Efficient Society: Why Canada is as Close to Utopia as It Gets,’ the writer argued that a desire to buy cheaper goods illustrates that our most pressing value is efficiency over sentiment, money over community, perhaps even prosperity over identity. The author is very convincing that the success of Wal-Mart type businesses is the success of capitalism since it decreases costs of living for society as a whole. More generally, Joseph Heath argues that capitalism’s best outcomes are two main values, efficiency and creativity. If we humanize this complex phenomena, capitalism, in effect monetizes efficiency and creativity, making it exchangeable via price between a large number of market players. Hypothetically, in a just, equally competitive world, the benefits to society as a whole of this massive exchange can be enormous.

Heath also recognizes that certain needs cannot be provided through the free market since these are costs that are neither efficient nor creative. These costs are human sentiment really; the sometimes irrational desire to be ‘nice’ to people who don’t produce either efficiently or creatively. That famous inability to see naked and poor urchins on the street. Instead of Marie Antoinette’s solution of capitalist cake sometime in the distant future, the Left always wonders, won’t bread do today?

Ironically, the grand dragon of capitalism, that vanquished the Communist Left all over the world, now is up against a new kind of foe. Human kindness. One can hope that the rebirth of the Left as the Ameliorative Left may achieve more than the Transformative Left. When the Gates’ become Mother Teresa and the Google creators voice socialist dreams, the world seems to be flipping.

Perhaps the truth is that the Left is not a system but always a response to a system. By nature the Left is as ephemeral as human kindness. It will rise where it is needed the most, like the answer to a prayer. But it lacks the organizing glue that holds systems and ideologies and even society in place. Can one imagine Bulleh Shah leading a government? Can one imagine Socrates managing a company? The Left is radical and transient. It fails when it is organized and instituted as a political ideology. The Left is human conscience, not the whole human. It is anti-power and that is its power. Whenever the Left became powerful, it has been corrupted. But without a Left, a system is bound to fail. Like the Oracle in Matrix, the Left is a necessary irrationality.

In an extreme free market system certain costs are seen as inefficient resource drains e.g., health care, unemployment insurance, worker compensation, maternity leave, female attrition due to pregnancy. The paradox of productivity is that a society that produces at 100% will burn-out (for want of a better word) Because of 0 unemployment, higher education and child rearing would be intolerable ‘expenses.’ We can see a bit of this paradox manifest itself in USA where there are significant economic disincentives for time off from monetized work such as family and higher education. To support near 100% productivity, a high level of present consumption is also necessary.

Capitalism hates costs on the one hand and pays a premium for creativity on the other hand. Creativity has a very volatile nature, an idea here today, becomes common tomorrow. Therefore windfall profits from new ideas have a much shorter cycle. Because of new technology and the ease of duplication, new inventions create competitors faster. It is easier to copy an idea than ever before in the history of business. On the other hand, in a benevolent cycle as observed in Silicon Valley, capitalist creativity (that taps into human potential) can lead to huge gains for society as a whole. But is capitalist creativity hype? Some of the greatest inventions did not come from business but from liaisons between business and University or between government and business—contrary to expectations from capitalism, from collaboration not competition.

Captalism on its own cannot be assumed to also create equal opportunity, equitable wealth, a healthy lifestyle, better parenting, health care or the 101 things that a functioning society needs. Joseph Heath gives very low marks to unbridled capitalism for certain needs that need collaboration rather than competition.

To understand why, let’s look at Game Theory

Heath uses game theory to explain the two forces that underpin a free market. One is the human tendency to collaborate and co-operate, the second is the tendency to compete. Certain outcomes that are good for society as a whole require collaboration and others require competition. Prices drop because of competition, whereas collaboration helps solve problems at the government level. It is dangerous to assume that all governance is about collaboration or that all free markets are about competition, but usually collaboration works for problems that society must solve to provide opportunities to its members.

Heath uses the prisoner’s dilemma to explain the two most common reactions to a problem where there is 1. Authority 2. Protagonists without complete information. Protagonists can choose to either compete or collaborate. Competition is good for society when it reduces prices (a positive impact of capitalism) and collaboration is good for society when governments use it to improve working conditions. If businesses collaborate instead of competing it is not so great for society (cartels, monopolies and oligopolies) and if governments compete it is mayhem (weapons race, civil war).

An extension of this analysis is as follows:

1. Nationalism does not produce high social value for the world as a whole, since it enhances competition between countries, communities and sects. Nationalism is most useful when it is directed toward a common cause—freedom from colonial rule, fighting corruption…i.e., it must have an enemy to succeed in motivating groups.
2. Capitalism without regulation is dangerous for society
3. Without ameliorative Leftist governance, capitalism will enhance rather than reduce inequity, reduce public goods and enhance the rich-poor divide.

The Left and Right in any society seem to bifurcate right down the middle of capitalism’s two biggest dilemmas: Competition and Collaboration. The Left seems to always look for collaborative answers, and the Right pushes for competition of some sort.

The Left: Let’s talk to our neighboring countries about the problem of industrial pollution. Delhi and Lahore are in a black cloud of smoke. Our children have asthma, it isn’t good. We should jointly regulate this.

The Right in Pakistan: Pollution from Delhi is giving asthma to our children. We can do nothing.

The Right in India: Pakistan’s pollution is drifting into Delhi causing asthma. We can do nothing.

For any functioning system, social outcomes cannot be improved without a functioning, strong and vocal Left. Regardless of what basis the government or society is organized around be it a republic, an Islamic state or a secular democracy, the Left must be the voice of its conscience and its minorities. Whether couched in Islamic memes, Christian values, or Hindu myths, depending on the mainstream group’s philosophy of life, the Left’s voice is key to solving difficult problems that require co-operation.

Otherwise the State will have only violence as a means to negotiation, and the Third World will always suffer from less freedom, therefore unequal exchanges, therefore exploitation.

There is a nasty side to capitalism (much like human beings), because of which capitalism abuses the trust placed in it. It loves captive, unquestioning and ignorant markets, which allow it to make supernormal profits. Crony capitalism is a common issue that becomes doubly difficult to manage in less developed countries. It is easier to prolong the product lifecycles in less developed countries as a result of crony capitalism. The same group that owns the newspaper will also have a brother in the army, a sister in parliament, a brother-in law as film distributor and also dabble in countless types of businesses with no checks and balances.

Businesses expend effort to erect barriers to entry to ensure that markets remain profitable. If the costs of production keep going down because of efficiency gains, imported labour and outsourcing then capitalism seeks to control markets through reducing the number of suppliers aka consolidation. If all efforts fail, the industry dies, since markets act in very disruptive ways.

Economists interpret the death to mean that people comprised of markets did not have any use for the particular product or industry. E.g., People still want Macintosh, but they don’t buy them because a competitor has metaphorically ‘captured’ their needs in another way. In this way, the car replaced the tonga. It wasn’t as though a car stood in front of people and they voted for it over a horse carriage. This sense of helpless change upsets Leftists a lot, and much of the debate gets subsumed in the Left being typically perceived as anti-change.

Economists believe that over time, society as a whole decides through its purchasing activity whether they want something or not. Conservative economists seem to think that price and purchasing behavior is almost like a ‘vote’ with similar legal validity.

But the Left does not agree. The ‘Left’ calls this silent co-opting of people, ‘manufactured consent’, ‘unwarranted force’ and even ‘imperialism’.

Because of capitalism’s nasty side, a new form of imperialism has overtaken us. Without any preamble, political debate or war (except terrorism) a headless imperialism has overtaken the world.

This imperialism overpowers others through the power of Information that influences purchasing behaviour. Information is probably the only way that trends, lifestyles and preferences change. Information through images is the most powerful means to influence choices. (For more on the the concept of reflexivity explained see George Soros).

In today’s imperialism, battles are fought on TV screens, in newspapers and movies, rather than on frontiers. The new frontiers are your minds. It seems just the power of language is enough to win territory and control resources. Just by changing words—from invasion to war, from resistance to terrorism, from yes to may be, new conquests can be won, without the slightest susurration in any court of justice. The kings of today own the lexicon of your mind and need no approval other than the clinical find and replace command of their word processing software to bring people in line with their agendas.

Media especially in capitalist democracies is completely aligned with capitalist interests. Each capitalist mogul has a strong media interest. Those who can influence media own the world more nearly than any small entrepreneur producing a great product for a great market need.

A silent dialogue has settled the matter by default.

The World: ‘If it can’t be bought or sold, it does not count. Will you pay for it?’

You-The Zombie: un huh

The World: ‘If you won’t pay for it, you can’t have it because you don’t really need it.’

You-The Zombie: un huh

End of the horsedrawn carriage. Enter the SUV
Did we even have a choice?

Questions about the environment, pollution, animal conservation, global warming (aka climate change) and family are settled thus. A few grunts and it is over.

Capitalism today is like a lost nuclear missile that nobody is looking for because they think it will come back by itself. Has someone pinned a homing device on it?

This loss of control is corruption on a grander scale than any Third World bureaucrat can ever pull off. The Marcos’, The Bhuttos, the Polpots, what are they in front of capitalism’s magnet? A magnet with a conflict of interest that shoots to pieces the high ideals of any organizing principal of any nation. It is the means to subvert and vanquish whole civilizations and thoughts. It is power, indeed.

Instead of improving the state’s phone system, we let foreign companies set up telecom companies. Instead of improving drinking supply, we let multinationals set up mineral water plants. Instead of improving our bus systems, we let several more car plants manufacture cars. Instead of asking people to bike or walk to save energy, we offer LPG. While our opinion leaders grow beards and vouchsafe immense fatalism as their understanding of divine providence, we glorify identity to the point that we can kill just to live a racially purer life.

And yet we prefer capitalism’s glamour to socialism’s ragged equality. We would rather persuade capitalism to be kinder to us than ruthlessly redistribute wealth. We would rather we felt we will own rather than realize that we can never own and that we can't really take it with us. We would rather be owned by the West than share more among the East.

We would rather talk about regulating capitalism than removing it; therefore the Left is now ameliorative rather than transformative. Then, is the Budha completely dead? Is inner peace another 'thing' people want after they get rich?.

As my cousin put it, first let me make my millions like George Soros than talk like him.