Thursday, October 9, 2014

Chris Dillow — The Establishment: a review


I would add to Dillow's assessment of modern capitalism by cutting to the chase. So-called capitalism today is not actually capitalism as advertised — individual risk takers freely competing on a level playing field. What "capitalism" actually means is favoring capital over the other factors of production, other than the top tier of management and celebrity, that is, prioritizing money and machines over people and the environment. It's more about distribution than production and consumption, and the narrative that promotes it employs bait and switch.

The popular narrative preached from the various bully pulpits and influence centers is based on the neoclassical view of capitalism based on risk-taking and fierce competition. In the stylized world of the neoclassical model profit is competed away, there is no economic rent, and everyone receives their just deserts based on "merit," that is, marginal contribution; The driving force is the incentive of unlimited upside potential that is posited as a necessary motivator for undertaking entrepreneurial and investment risk.
 
The neoclassical stylized model doesn't fit reality. Rather, capitalism is a system in which economic rent and rent-seeking are institutionalized, and gateways and gatekeeper put in place to support the class structure based on insititutionalized power, status and wealth that create privilege. Actual capitalism has transformed feudalism into neo-feudalism. 

Historically, the most successful organizations have been either military or organized on the military model. The military organization and operational model is a command system based on a chain of command and obedience to commanders. Modern states and firms, especially large corporations, are organized on the military model. 

Competition is not among atomistic individuals but rather command systems clashing over power, status, wealth and territory. The rest serve capital as either cronies or minions that are cut in on the spoils, or as cannon fodder in offices, shops, factories, and fields, including battlefields.

In the oligarchic democracy of modern republics, governments are also command systems masked by elections in which constituents get to choose candidates that rise to the top in the selection process based on their ability to fundraise from the donors that chiefly fund political campaigns. These donors are all members of the elite, and they fund candidates that they judge will support their interests.

The result is a façade of capitalism and democracy that is just another way of distributing power, wealth and privilege upward. It is far from a government of the people, by the people and for the people in which individuals compete on a level playing field with equal opportunity to succeed and succeed based on merit. That's a fairy tale. The strange thing is the number of people that fall for it. Many of the elite believe their own BS, and many lower down want to believe it because they also believe that they have a shot at the top, however unlikely. 

Stumbling and Mumbling
The Establishment: a review
Chris Dillow | Investors Chronicle

1 comment:

Anonymous said...

We do have real capitalism. This is what capitalism is: a system in which most of the means of production are privately owned, and in which these productive resources are operated for a profit.

Monopoly capitalism and oligopolistic capitalism are just two forms of capitalism, not something other than capitalism.

There is no "pure" form of capitalism filled with perfect competition, because perfect competition is an inherently unstable condition. The natural result of competition is victory, so any competitive ecosystem of firms is always naturally tending toward monopoly.

Human nature being what it is, any system that permits the concentrated accumulation of private capital wealth, and that vests most socioeconomic decision-making power in these wealth owners, is going to be one in which other people tend to be abused, exploited and turned into the instruments of other people's pleasure.

The only for people to protect one another from the ravages and abuses concentrated private power is for them to build a system that prevents power from concentrating in the first place, and that maintains a roughly equal distribution of power. And distributing power equally requires distributing wealth equally.