Plenty of cults exist - every cult has its 'religious dogma', its idols, its 'prophets', its 'science', its 'proof' and its intolerant liturgy of demands. Cults everywhere: Corona, 'The Science' or Scientism, Islam, the State, the cult of Gender Fascism, Marxism, Darwin and Evolution, Globaloneywarming, Changing Climate, Abortion...
Tempus Fugit Memento Mori - Time Flies Remember Death
‘Capitalism’ as a word or description, is a recent innovation. Its origins probably lie in the late 18th century economic descriptions and relate to capital rich merchant and trading houses. ‘Caput’ the Latin for head is its root, yet the history of ‘capitalism’ is nothing other than the history of man’s development. There is no start nor end date for ‘capitalism’, nor is there one form of capital development. The current usage of the term, based on early modern ideas around capital wealth, is dangerously inaccurate, and indeed slanderous.
The process of capital accumulation is usually derided by those who don’t have, or can’t produce economic profit, or would like to control economic processes. Capitalism in its Marxist, post – modern sense does not of course exist. There is no dialectic towards an inevitable reduction in profit and wealth. Nor are capital returns destined in the long term to trend to zero. In the 17th century the Dutch V.O.C. trading monopoly in the Far East posted net margins of only 5-10% per annum. CEO’s of today’s successor multi – nationals would be quickly fired for such a comparably inept performance, if such returns were booked. Marxist theories don’t fit market reality.
So what is capitalism in the pure economic sense, leaving aside cultural, moral and institutional factors? Economic capitalism is not just market trading. The accumulation of capital and the market based exchange of goods and services has been on–going for millennia. As long as the state in its various corrupt and distorting forms, does not completely destroy individual freedom, and market conditions, some form of ‘capitalism’ will exist either inside a ‘legal’ economy or outside in a parallel ‘grey market’ economy. Economic capitalism is a price based system where value and demand are reflected in the priced of goods and services in various market segments. Capitalism is in short, a dynamic and disruptive set of forces that can either accumulate or disaggregate capital in any and all markets.
This sounds rather obvious and simplistic. But there are two important conclusions from the above. First, ‘capitalism’ sans les autres (culture institutions, laws) is not a fair nor accurate description of an ideology. Economic capitalism by itself does not in reality exist. Second ‘Capitalism’ is really a layer or super – structure, which lies on top of a market. In other words, capital accumulation, or economic capitalism in the modern sense, is a ‘system’ which uses some markets, or parts of ‘a’ market to achieve capital mass. Capitalism will engage in some parts of the market and ignore other market segments. Capitalism like a fashionable dresser, is selective.
This might sound like gibberish, but it is really the crucial aspect of economic capitalism. Capitalism exists in many different forms and levels. In fact it is always changing and depending on what ‘level’ of society you are at, you will see capitalism at work in different ways. Historically there have been 3 levels of capitalism in the development of civilization.
Capital Formation has always existed within some sort of ‘state’. Inside the state there is typically one level – call it the grey market – which exists outside of formal legal control. In the modern world roughly 30% of a country’s GDP is found in this shadow world. Labor, services, barter and criminal exchanges have always constituted a thriving, and tax avoiding sector of the economy. This level is perhaps a primitive, yet dynamic expression of ‘personal – capitalism’.
Above this level we find the small to medium sized merchant trader and contractor. Usually specialized by profession and market, these small – scale legal market actors are highly adaptable, innovative and usually capital–poor or at least not excessively capital–rich. At this level some form of real competition exists. Attacked from above, below and from the sides these small–scale concerns are constantly in danger of failing. Here Schumpeter’s ‘Gales of destruction’ are all too pertinent.
Above this level we have capital accumulation and far reaching market and indeed state power. Large enterprises, trading houses, banks, private capital mangers, and government–protected entities accumulate vast capital, either made or borrowed, to dominate sectors. Here capitalist competition is dire, and the desire to monopolize or set up extreme barriers to entry obvious. Capitalism at this level, is a set of rules and factors far removed in scope and ruthlessness from the other two levels. At this level to some degree, capital can co–opt political processes.
Capitalism is clearly not monolithic. It varies in time and location. Dutch capitalism in the 17th century was quite different than the modern (rather mercantilist) American version; and from the trading regimes of medieval Genoa or Venice. Capitalism is highly mutable and selective. It varies by level of society, industry and market. It can be quite personal or very abstract.
And therein lies the greatness of this millennia–old ideal. Capitalism is in essence about choice. You receive compensation for the perceived value or worthy of your output. You might not agree with what the ‘market’ finds worthy. Paris Hilton, most movies and TV are testimony to some obvious market blemishes. But the important aspect of economic capitalism is choice and it is choice which dictates prices, supply and demand, and ultimately capital profits. It is this capital accumulation which then provides the basis for the innovation, enhancements and incremental improvements which lead to ‘revolutions’. The danger of the capitalism is that the third or most abstract layer, becomes a tool for government enrichment and power mongering.
Though maligned and misunderstood capitalism is all its many forms, is the pre–requisite for freedom, individual development and social progression. Its disruptive and dynamic nature is a vital part of a free society. And keep this in mind of the top 50 companies in 1970, 80% have been replaced by new firms. Even at the highest level of capitalism, Schumpeter’s dynamic disruptions are all too evident. IN today's mercantilist state managed world it is clear that more capitalism, less politics, and fewer 'concerned' bureaucrats would be noble objectives.
