The "ISM" of Capital: A Speculative Essay
What is capitalism?
As you well know, if you ask one hundred people that question, you are likely to get one hundred different answers back.
Some people will cite a general date and geographical location from which it is supposed to have first sprang --- or is it sprung? Some people will say that "it" has "been around forever."
Taken together, actually both answers comprise the truth, as far as I can tell. Mind you, I am not an expert in such things; but I hope that I can suggest a clearer way to grapple with the concept.
Let us begin linguistically. There is one thing we know for sure about capitalism: Like any word ending in "ism," capital-ism is the "ism" or system of the thing that precedes it.
That is to say, "capitalism" is the "ism" or system of "capital."
What is "capital"?
Capital is money or resources "invested" or put up, with the intent of making a profit on it. That is to say, if you invest $100 in an enterprise, the next time it is time to reap the rewards, if there are any, you would like to get back the initial $100 plus, say, another $50.
If you "invest" your factory into the economy of a so-called "emerging market," you would like several things to happen.
1. You would like to recoup the monetary value of the factory, you have "invested" in, say, China.
2. You would like to recoup the cost of the move from the United States to China.
3. You would like to recoup the cost of training Chinese workers.
4. You would like to expand the customer base for your goods and services. You would like to sell at least as much of your goods and services in China, as you did in the United States.
5. You would like to additionally profit from this activity by paying Chinese workers a lot less than you could get away with paying American workers.
6. A major part of this procedure, as you know, is for corporations to negotiate a favorable tax situation for themselves in the "emerging market."
7. In addition to all of that, you hope to profit further from your original "investment" of your factory, by what is called the right of repatriation of profits. What that means is that you want to right to transfer the earnings out of the country, back to your country of origin, or wherever else you care to park them. The reason for this is the "floating" currency system.
As you know, President Nixon took the U.S. dollar off the gold standard. This policy created the environment which corporations seek to take advantage of. By the simple act of transferring your profits to wherever you like, you can make monetary gains from currency speculation.
For example, if you're an American company called "Fred's Soap," and you make $100 in Peru, you want the right to transfer that money to wherever in the world you want to. You might buy Japanese yen with it, then convert it into British pounds, and then when the time is right, you can bring it back stateside, converting the money into U.S. dollars.
If you are skillful and lucky, that original $100 dollar equivalent, which was the profit made in Peru, might become $1000 or more, through the simple act of electronically buzzing it around the world.
Now then, having said all of that, I should say that not all commercial enterprises that have the obvious intent of making money, are capitalistic.
That is to say, "making money" simply is not the same thing as "profit," making continual profit on investment.
For example, think of the neighborhood where you live; and think of how you pass a typical day. In passing your typical day, there are businesses that you frequent to get your daily needs and wants met.
There's the hardware store, the bagel/coffee shop, the convenience store (whether its part of a national chain or not), the dance studio, Yoga studio, Karate studio, your bank or credit union, the post office (they sell stamps and such there).
I would argue that each and every one of these enterprises are indeed commercial, money-making operations.
I would also argue that not one of these institutions are actually capitalistic. I say that because not one of those institutions really have the goal of making a "continual profit on investment." I would argue that their goal is security and to be a valued part of the social fabric of the community.
This is especially true of those family-run businesses, I would say. Consider the neighborhood, family-run coffee shop. We're looking at life partners who, if they are not retired from another career, have "day jobs." They have the coffee shop on the side for security, an extra source of income; they do not hope to become rich from the endeavor.
Their intent is security. Their intent is "no surprises." Their general intent is to make the same amount of money week-after-week, month-after-month, year-after-year. That is their intent and expectation, not that occasional spikes in profit would not be welcome.
Their other principal intent is, as I said, to be a valued part of the social fabric of the community.
These enterprises do not advertise in a competitive way. That is to say, they will not go much further than handing out flyers to let the community know of their existence, if they are a new enterprise. They will not advertise in a way to try to disparage "the competition."
That is to say, they will not say: "Come to Joe's Donuts! Better tasting and more healthful than Dave's lard holes around the corner."
Are you following me?
Does that make sense?
The big multinationals do advertise in a "negative," competitive way. Though more and more of that energy seems to be invested in the court room, as the big corporations thrash it out over patents.
Now, "negative" advertising is a kind of "capital" accumulation, that is to say, profit-making: the more people you can discourage from buying your competitor's goods and services, the more people you hope will buy your goods and services.
This profit-making intent makes "negative" advertising capitalistic. The money spent on advertising and marketing is "capital." You see this as corporate budgets for advertising and marketing---as opposed to research and development---continually rise.
What about the concept of "state capitalism"?
Full disclosure: "State capitalism" is a term I have used in the past. But the term is an oxymoron like jumbo shrimp.
But if you agree that we have established that capital-ism is the "system" of making repeated and continual profit on investment, then we must ask a basic question.
Has it ever been the goal of any government, national, state, or municipal, anywhere in the world, at any time in human history --- to make continual and repeated profit on investment?
The United States is said to be the world's chief capitalist country. But does that mean the goal of its government---national, state, county, or city---is, in and of itself, to make continual and repeated profit on investment?
That is to say: Is government in the capitalist United States of America, a capitalist institution?
No, it is not. Government is not a capitalist institution.
Government's role in a capitalist country like ours, is to legally guarantee private property, upon which capitalism is built.
Now, it is true that some countries hold certain industries under government control. But the very act of doing this precludes these governments from engaging in capitalism, since the competitive accumulation of continual and repeated profit-making on investment is not the goal in implementing state control of industry.
Let me back up a little.
Countries have always been "competitive" with each other. And countries have always been about increasing national wealth through the regulation and promotion of commercial activity.
But it is also true that "capitalism," per se, has been, for most of human history, something that the bulk of society was always ASHAMED OF. As far as I can tell, this is true universally, for whatever time you want to look at, in any country you care to examine.
For most of human history, the "system of continual and repeated profit-making on investment" was the narrow province of a socially compromised, shady group of people called merchants.
The activity of the merchant is, by definition, about "buying low and selling high," and all that, and is, therefore, most fundamentally "capitalist." In this way, both propositions we considered earlier, are true.
Although through the activity of the socially compromised merchant class, capitalism has "been around forever," --- there is another sense in which "capitalism" cannot be said to really exist in the world beyond the shadows, until the activity of "continual and repeated profit-making on investment" becomes generally socially acceptable.
As you may know, for most of human history, even merchants, themselves, tended to be ashamed of their profession, if "ashamed" is the word. We see this in the strenuous activity they undertook to rise above their station: either by buying aristocratic titles or getting into government service by passing the civil service exams, or "marrying up," as it were.
The stock market
As you know, the most intensively capitalistic activity there is, is stock market investment. However, you also know that not everybody "invested" in the stock market is, themselves, engaged in "capitalism."
Most of us who are so "invested," are connected through the 401Ks from our jobs. You do not control that account. You do not directly "invest" anything. The company does it for you; and even so, you do not expect to get rich from the returns on your company 401K.
It is your pension plan.
You know something, I would wager that most of us will pass our whole lives without actually doing anything "capitalistic." It seems to me that the extent to which we "support" capitalism, is the extent to which we dream or hope to "be the boss someday;" and it is a feeling that comes over us whenever we feel that our unique genius is going particularly unappreciated at our places of employment.
I'll tell you something else. I think it is the case that, likewise, during the Soviet era, the average Russian only "supported" that which was called "communism," only to the extent that he dreamed of being an important person in the Communist party, politically, or a powerful official in government. He probably would not have "dreamed" of being a Rockefeller-type because the Soviet/Russian state held the bulk of industry in its own hands.
Incidentally, it is the case, historically, that nation-states tended to hold industries in their own hands because of their profound mistrust of the merchant/business class. Again, this is universally true, as far as I can tell.
There are those who might point the economic catastrophe that befell Russia during the 1990s as Exhibit A. Russia was subjected to what is known as financial shock therapy. The key piece to this, for our purposes, was the fact that the Russian economy was privatized upon the advice of consultants from the United States and the international financial institutions, like the IMF and World Bank (1).
The point is that the economy fell into the hands of creatures called oligarchs, the 1990s Russian equivalent of the American early-twentieth century robber barons. As you know, the 1980s and 1990s was the era of the privatization frenzy; and the Russian oligarchs "frenzied," shall we say, just as well as, if not better than anybody else. The creation of these maniacally voracious asset-strippers was facilitated by the shock therapy program imposed upon the Russian economy, which, for one thing, featured out of control inflation for things like food and fuel, things that ordinary Russians needed to get along day-to-day; and a curious stability, at Soviet-era levels, of prices for things like commodities, natural resources that could make already rich people super rich (2).
Not to be a cheerleader for Vladimir Putin (I wouldn't be a cheerleader for any politician in any country), but he was put in the position of having to clean up the mess. He either exiled or placed the oligarch creatures in prison, where they belonged (3).
I deviated from my original point. The point is that only America's top one-tenth of one percent can be said to have actual, capitalistic engagement with the stock market. Perhaps its the entire top one percent, but I shouldn't think its more than that.
I know that there are legions of people outside of the top one percent who scrutinize the market, try to "play the market," as it were. Some of these people are called "day traders," I believe.
But tell me: Isn't it also true that, as a class, these folks, for all their manic staring at computer screens and watching Bloomberg News, only ever, basically, end up treading water, breaking even, holding steady?
They do not get rich, do they?
At best, they are "capitalistic" in their dreams; they are not "capitalistic" in the results they achieve, or can even reasonably hope to achieve.
After all, isn't it true that the best way to know which stock to "bet on" is to be sitting on the board of directors of two or three corporations, so that you can know which organizations are getting the fattest tax breaks and most generous subsidies from the government?
Otherwise, its all a gamble. A stock is, after all, a bet on the future profitability of a company. Playing the stock market is "gambling," therefore you should not do it unless you can afford to lose sometimes.
You may recall that President George W. Bush (2001-2009) wanted to privatize Social Security. He wanted to transform it from a passive "entitlement" (Note how the programs of the social safety net have become obscenities!) into an active private, personal investment account that individuals and families would control.
All I'm going to say about that, is that it seems to me that such a policy doesn't exactly come out of the orthodox conservative playbook. After all, its one thing for states to establish lotteries and the like; but it is quite another to actually force people to spin the wheel.
Okay, we're done here.
Thank you so much for reading! :D
1. [citation pending, but I got the notion from Misha Glenny's McMafia: A Journey Through the Global Underworld and Naomi Klein's The Shock Doctrine: The Rise of Disaster Capitalism.]
2. [citation pending but Glenny, Misha. McMafia]
3. [citation pending but ibid: Glenny, Misha]