Changing Perspectives: Conclusion
We tend to forget that government, politics, and economics are not the same thing. The word politics and the phrase political party don’t even occur in the U.S. Constitution or the Bill of Rights. Nor is the word economy even implied in either of these documents. In fact, George Washington, the founder of our nation warned strongly against political parties and said little if anything about economics. Government are the structures by which a society is administered, how it’s laws are made, enforced, and adjudicated, and how officials are installed and removed from office. Politics is the way that groups of people leverage their numbers to wield authority and shape policy. And economics refers to a system by which goods and services are created, traded, and disseminated throughout a society. Naturally these structures are inter-related in how they are manifest and some are more tightly coupled than others but they are not equivalent to one another.
Capitalism is an economic structure based upon leveraging capital to increase its value. It is not related to either a representative form of government or the political parties which vie for control of a government. Nor is it directly related to the concepts of freedom and liberty. In an ideal system capital is invested in an enterprise with the result being an increase in value of that enterprise beyond the sum of the original value plus the investment. For instance, upgrading an assembly process might allow a manufacturer to produce more of a product at a higher quality than before so that more of the product can be sold. Profits rise and value increases. Its only relationship to freedom is the concept that the money belongs to the owners and investors so the profits belong to the owners and investors.
Free market capitalism is perhaps the simplest, most basic and pure economic system with its natural checks and balances based on supply and demand. That, however, doesn’t mean that it can exist under any set of conditions. Indeed, capitalism, like any other system, requires the right conditions to thrive and always walks a fine line between sliding into either feudalism on one side and fascism on the other. As soon as business owners and investors begin to view themselves as isolated systems there is a danger that feudalism will arise. On the other hand, when a free-market capitalist economy stumbles, the first response is often protectionism and government bailouts which can quickly lead to fascism. Either way the result is the same, a rapidly shrinking middle class and the disappearance of avenues from the lower to the upper class.
For market capitalism to thrive there must first be capital, resources, and a market. If there is no money, nothing to invest in, and no consumers there is no value. But these basic conditions are not the whole story. Simply investing capital and reaping rewards is no different than Pharaoh’s use of corvee labor or southern plantation owners prior to the Civil War. That was capitalism, too, but here in the West we generally consider it a bad form of capitalism because over thousands of years great men and women realized, and often died, for the idea that humans should be treated better than animals. And that is backed up in our Constitution, the Bill of Rights, the Declaration of Independence, and the writings of the founding fathers. What they realized is that there is a form of capitalism that can benefit everyone. A limited form of capitalism that lets the benefits of technology and the struggles of man to be shared by all who are willing to participate.
So how is this capitalism different than pure capitalism? Most importantly it recognizes that business concerns are not isolated systems but are part of a larger community. Not the community of businesses, but the community of employees, citizens, and states. After all, without employees, consumers, and a stable government, any kind of enterprise becomes extremely risky. When a rising tide lifts all boats those without boats drown. Community-based capitalism means that those with the largest boats throw life rings to those without. It is of course the job of the swimmers to grab take the life ring, but without this act, capitalism becomes feudalism. When the acquisition of personal wealth (aka, greed) becomes the principle occupation of a business owner or a group of investors, flowing success down to the masses is the first thing to be cut, people start drowning, and the system fails. And in the end, leaving government to throw the life lines only makes things worse.
Community-based capitalism also requires the people engaging in business transactions to follow a basic code of ethics and honesty. Investing is founded on agreements. When agreements cease to be honored in both word and spirit, mistrust and animosity are the natural result. When an investment is made a product is the natural expectation, whether that product is a good, a service, or even some kind of financial instrument. When no product is received, and no product was ever planned on the part of the business owner, or the product was so risky as to have been misrepresented, the system fails. When this happens investors become cautious and owners become protectionist. While those at the bottom of the system feel this failure most immediately, it nevertheless affects everyone and the economy stops growing.
There are other conditions necessary for capitalism to thrive but arguably none is more important than the concept of reward. It is deeply ingrained in our psyche that hard work and honest ambition should be met with increasing success; the rising tide. While this can’t be guaranteed, a boat with a hole in it is no good at all. Most people start with little or nothing. The only way they can move forward is through help from others, whether that help is direct investment or simply being given a chance. This isn’t charity to the poor. This is recognition of talent and ambition and a helping hand to realize potentials. New blood is the life blood of any enterprise. That is why America has stayed so innovative, the constant arrival of literal, new blood. It is just as true in business. True innovation almost always comes from the outside, because attacking problems in a unique way almost always comes from a different kind of thinking. Not everyone is ambitious and innovative, and most people realize when they aren’t, but for those who are, they must receive the help they need to succeed or they will simply stop trying at some point and a key driver of community-based capitalism is lost.
We’re a capitalist nation but we tried to be different. And for a long time we were. I’m not so foolish or idealistic as to believe that prior to 1950 American business was kind, charitable, and generous. However it is incontestable that the spirit of community that once pervaded this land is gone, or is only a faint glimmer of what it was. When someone starts an enterprise it is always hoped that riches will be the result, and this is natural, but should riches be the only desire? The idea of building something of lasting value that also serves the larger community seems to be gone to have been replaced by building a business as fast as possible, selling it for as much as possible, and moving to the beach. Not only does this mindset ignore the hard work of the employees who also built the business, the government that kept the economy stable while the business was growing, but most importantly it minimizes the many relationships formed over years of hard work – which often have no relationship to the business itself. Because when you move to the beach your friends don’t usually move with you, though they probably helped you along the way if only for emotional support. Undoubtedly the high divorce rate in America stems from this same phenomenon; if a relationship isn't profitable, it is cast aside with no more thought than a book that failed to deliver as hoped. And since this has been the plan all along - acquire, cash in, unplug - what does it say about the value of relationship and community? When greed is the only metric, money is the only thing that matters, and that is a very good way to describe relationships in modern America; money is the only thing that matters.
When money is the only thing that matters, honesty and ethics are nothing but inconvenient liabilities. As long as things are done legally – which generally means that the contract was written by a very slick lawyer – a business owner can retire with a ‘clean’ conscience. No matter that the financial system of the entire nation has been destroyed and countless boats have been torpedoed, no matter that untold resources have been sucked from a community, the beach house, college for kids, and vacations are secure. The elimination of greed and dishonesty as vices, and the elevation of them to a twisted virtue, has done more damage to this nation than any other single thing. Whether it is toxic mortgage assets, cashing out and pulling out, or driving the automotive market with unsustainable products, greed and dishonesty have crippled this nation. The only thing more damaging is that those responsible have been allowed to keep their winnings only making them, and their practices, all the more enviable.
So why should I, or anyone else who is ambitious and innovative, work hard for a reward? There was a time when nepotism was looked down upon. It happens sure, and it’s only natural to want to leave something for the family. But when that legacy eliminates the just-as-natural cycle of hard work and reward, innovation will pay the price. But cashing in and pulling out can’t happen as fast when there are other boats in the picture. Far easier to make the anchor chain of others so short that their boats flood and sink. After all it is very easy to say that, “Success isn’t a guarantee,” and wash one’s hands of the matter. And this problem is only exacerbated by those who’ve enjoyed their success through dishonesty or cronyism. Those who’ve cheated are not generally disposed to helping others, and those who’ve been granted their lordship have no empathy for those still struggling. In fact, they usually feel they’ve lifted themselves by their own bootstraps and advise others to do the same.
Dwindling access to resources. Wealth hoarding. Lack of community. Dishonest and unethical behavior. More work for ever less or no reward. The failure to punish those responsible for fraud and waste. Toxic politics. Corrupt government. Public money used to sustain the dying enterprises of swindlers. Nepotism and cronyism. Hedonism. Materialism. Selfishness. Paranoia. Relationship abandonment. The conclusion is only too obvious. The conditions for healthy capitalism no longer exist in America.