About Capitalism

It will come as no surprise to readers of this blog that I am a left-winger when it comes to economics and politics. I would not be adverse to even being described as a socialist. But that does not mean that I am opposed to all capitalism, or don't believe people should be allowed to better themselves by making money -- even a lot of money.

But I am opposed to an unregulated capitalism, where the rich (the holders of the capital) are allowed to pervert the system and hog all of the profits of the system, leaving workers with barely enough to survive. To me, that is simply economic slavery. A regulated capitalist system is much better because it not only allows the rich to make lots of money, but it also allows the workers to share in the benefits of their own labor.

The blog worldwide hippies has just posted an excellent article on regulated or managed capitalism (and why it must be regulated). I urge you to go read the whole thing. To whet your appetite, I am posting part of their article below:

. . .Modern capitalism functions as a productivity funnel, taking the 2% annual productivity gains of the economy as a whole and concentrating it, so that labor gets none of it, with capital multiplying that 2% by factors of 5, or 10 or more to generate 10%, 20% or even greater returns to the owners. The added-value of economic activity is created by all the factors working together, including labor, but capital has rigged the rules of the game so as to claim it all for itself. Labor is treated as nothing more than another commodity, like bushels of wheat or barrels of oil. Capital flies around the globe at the speed of light, searching out the cheapest labor markets, and exiting just as quickly, while labor, real human beings, are pretty much tethered to their physical homes, bodies, skills and education. Union bashing and busting is all about making certain that your labor is never treated as anything more than a line item on an income statement that can be bought, sold and traded at will on the open market. In the modern capitalist economy, labor can never be permitted to be seen as “human” in any way. As has been pointed out by others, capitalists actually like the idea of an economy based on the game “Monopoly”, where it’s winner-take-all for the hotel property/capital owners. Except of course that, for real humans, it’s not a game.


The typical approach by the Left in addressing this demand side of the equation has been redistribution, primarily through tax policy –progressive income, wealth and inheritance taxes, to be redeployed into the economy either as social infrastructure (roads, schools, hospitals) or safety net spending (Social Security, unemployment insurance, and Medicare). All-in-all, this is not a bad strategy. When the top 20% controls 65% of the income and 85% of the wealth, there are not a lot of other options. In fact, I would argue that under current conditions, it remains the best strategy, as most every supply-oriented approach tends to kill the golden goose through unintended consequences that strangle capital formation and deployment. Capital, of course, recognizes both its natural advantage as the scarcest of the production factors, and the limited arsenal that the public can employ, and so has been reflexively trained to yell “Class War” whenever the subject is broached, hiding behind the hypocrisy that it was they themselves who first declared war by rigging the rules and denying anyone but capital shareholders from having a say in the distribution of the value created by the WHOLE business enterprise (which, to remind them once again, includes labor). . .


Short of throwing capitalism out the window completely, the prescription would seem to be to get out of the way of capital formation (health, environmental and safety regulations excepted), use progressive taxation liberally on the demand side, along with giving labor a seat at the management table, to even the playing field, and promote stability by holding growth in check with restrictive monetary policy and social safety nets – democratically managed capitalism. For the record, capital gains taxes are NOT part of the supply side, capital gains are the RESULT of productive capital – there is no need for unearned income to be taxed at half the rate of labor. The Capital Class will of course scream bloody murder and threaten to take their capital elsewhere, and that is part of the trade-off to be considered. However, look at what’s happening today – the lowest tax rates in generations and the jobs are still going to low-wage countries – so what more have we got to lose? Capital cares first and foremost about its protection, and nowhere else on the planet is capital better protected than in the U.S. Getting taxed at 35% or 50% on your billionth dollar is a good problem to have – at least you made a dollar and you still have your initial capital intact. And if those tax dollars are being reinvested in the economy as public infrastructure and education available for later productive use by capital, the U.S. will always remain a good, if not the best, option.