Saturday, July 30, 2011

Government, Capitalism, and the Flow of Capital

With its Reaganesque trickle-down paradigm, basic capitalism --- raw, primal, Social-Darwinistic --- is like a purely gravity-fed water system. It'll function, but its reliability and volume of flow are at the mercy of changing, uncontrollable external conditions, and its destinations are completely constrained, often not where delivery is most needed.

Such water distribution systems worked (in a manner of speaking) for the Romans two millennia ago. But no reasonable citizen would choose them for a complex modern society, populous and sprawling, needing to maximize the benefit to be derived from scarce resources, and hopefully also concerned with a modicum of fairness for all of its people. Analogously, such a paradigm makes no sense as distribution method for the modern flow of capital.

Yet that is the direction to which virtually all Republicans and many Democrats are taking this nation. It must rank as one of the great ironies that capitalism, always arguing for the "best" use of scarce resources, so frequently and so thoroughly mismanages the scarce resource from which it takes its name.

And capital does seem to be a scarce resource, at least to the average person. Beyond personal finances, lack of money has become the rationale encountered for countless actions, ranging from corporate opposition to wage hikes (including even the minimum wage), through the neglect of infrastructure, to the elimination of some government services and the scaling back of others such as Social Security, Medicare, and Medicaid.

However, an objective observer from another planet might conclude that our problems arise less from inadequate capital than from failure to use it properly.

Consider the financial "industry". The stock market is basically a combination of numbers racket and circular firing squad, periodically resuscitated by cash transfusions delivered by its minions in Washington and fresh marks in the hinterlands. Except for IPOs, stock buybacks, and hedging of raw material costs and foreign exchange rates, trading is of little benefit to genuinely productive companies, and far exceeds the levels needed to establish a credible secondary market.

As to the rest of our economy, many of its goods and services --- expensive or cheap, exalted or plebian --- are actually of little true value. They are basically churn that only serves to provide the populace with enough employment and income to purchase its own stash of unnecessary junk, while business takes a portion of each transaction as profit.

I'm not advocating that we don sackcloth and become wandering ascetics. But I do find it intensely objectionable that we as a nation devote the overwhelming part of our economic energies to the unimportant, and to militarism, while the essential functions of a civilized society are aggressively being demolished. That combination, however, appears to be the inevitable outcome of laissez-faire capitalism coupled with inadequate governmental revenues, faulty leadership, and a fearful and easily-manipulated populace. These mutually reinforce each other, to our great national detriment, and as remedy we need to address each of them not in turn, but simultaneously. They are where our political focus should be, not on the dance-of-the-debt-ceiling, which serves only as distraction to enable the further looting of our nation by the wealthy, the corporations, and the military-industrial complex.

To return to my opening metaphor: It is clear that right-wing trickle-down is a faulty paradigm for the twenty-first century. Government, when it operates properly, is like a pumped water system, delivering a precious fluid when and where it is needed. When operating properly, government performs vital economic and societal functions which the capitalistic corporate sector cannot do without conflict of interest and/or added cost (if it were even willing to address them at all). To the extent that government does not function properly, we the citizens of the United States need to reclaim it, not cede it to the forces of greed, ignorance, and incompetence.


  1. Please name a "Government that is operating Properly" that is not in debt as great a percentage of GDP as the U.S. And has more than 30 million people.


  2. Try Germany at 78.8%, the United Kingdom at 76.5%, France at 83.5%. I could go on and on, but why bother?

  3. As usual Richard you have nothing to add to the discussion. You seek to only distract from the main points made and to sabotage any meaningful discourse that could be induced by Fred's thoughtful commentary. You are clearly a plant. Take heart, Fred, Richard is only here because you have some meaningful food for thought which he is trying to cut off at the pass.

  4. Excellent analogy, Fred, of the trickle of water to a thirsty Middle Class provided to us by the oligarchy and the "Free" Market - just enough to keep the workforce from dying out but not enough for them to prosper - and contrasting it to well run, functioning government which "is like a pumped water system, delivering a precious fluid when and where it is needed. When operating properly, government performs vital economic and societal functions which the capitalistic corporate sector cannot do without conflict of interest and/or added cost (if it were even willing to address them at all)."

  5. @Valerie,

    Why then when the people you elected and will vote for again were in control with overwhelming majorities did none of this happen? By the way when are you going to post on third world workers so I can post the statistics I have been collecting?

    The Conservative "Plant"

  6. Richard,

    Your tired old question has been answered ad nauseum by more people than I can count over the last few months on blogs we both read.

    Stick to the point of Fred's post, Richard. Write about that.

  7. The Hydraulic Empire

    Here is a critique of the concept of the Central Government as the major enabler of commerce  and incidentally being the major controller of commerce as a result of being the major enabler. The following  quote could help explain why there was so little change beyond increasing the Central Government's control of the Economy (the handout to the big financial institutions, the public workers unions, and the passage of A.C.A.) when the Obama Administration replaced the Bush Administration. It additionally goes some distance in explaining the continuation of various overseas adventures by the current Administration.

    "The typical hydraulic empire government, in Wittfogel's thesis, is extremely centralized, with no trace of an independent aristocracy.  Hydraulic hierarchies gave rise to the established permanent institution of impersonal government. Popular revolution in such a state was impossible: a dynasty might die out or be overthrown by force, but the new regime would differ very little from the old one. Hydraulic empires were only ever destroyed by foreign conquerors."

    In a Civilization where a majority of the people raised their own food, water in areas where there was insufficient rain fall to farm, was the "life blood" of Civilization. Those that controlled the distribution of water ruled over the rest.

    Today the life blood of our Civilization is commerce. The great battles of the last 300 years have centered around the control of the means of production, the resources required for production and the means of distributing production including the paths of distribution. 

    Lenin said it as well as any, " It is not our immediate task to “introduce” socialism, but only to bring social production and the distribution of products at once under the control of the Soviets of Workers’ Deputies." (Central Government).

    It may seem "fairer" to some to let the Central Government control as much of the economy as possible and by so doing redistribute it's wealth. It may also seem fairer to let the Central Government collect all of the tax money and distribute all of social support.  But as Mr. Justice Marshall said, "The power to tax is the power to Destroy.".

    Part 1 of 2


  8. Part 2 of 2

    The Hydraulic Empire Cont,

    The story of the De Havilland Comet

    The Comet was the first pure jet passenger aircraft to enter commercial service in 1952 a number of the Comet one A.C. Crashed in a short period of time causing the fleet to be grounded. The result of a extensive series of tests determined that the Comets crashed because of catastrophic structural failure in areas of high stress. The solution was to design aircraft in a way that mission critical parts had alternate paths to carry the load if the primary  part or path failed.

    Aircraft design is revenant to a discussion about Government for what reason?

     Governments too are complex mission critical systems. The more direct control that Government takes on itself the more critical it becomes for  Government  to continue to operate in a predictable and uninterrupted manor.

    When the Country was founded there were three levels of Government. Local, State or Territorial, and National. Because of the length of time required most of the day to day decisions   were made at the local level in fact prior to the early 1900s almost all social services were provided on a local level. The major exception being Military pensions and Military health care after the Civil War. In the North pensions were provided by the Federal Government, housing and health care were provided by the various States until WW1. After 1917 The Federal Government provided both as well as assuming civilian services in the early 1930s. The trend toward increased Government involvement has grown to a point where today around 49% of the population receives some sort of monthly benefit from the Federal Government. The interruption of these services would be catastrophic. The Federal Government has made itself indispensable to a large percentage of the citizens  no mater who runs the Government. The politicians know this and there is a relatively high level of contempt for the "average" citizen. The "political blogs" are awash with the same sort of comments.

    "The radical right has risen to power because so many low-information Americans know so little about our nation’s political and intellectual history"

    "Contempt for the intellectual abilities of the working class led to the claim that the vanguard party should rule on their behalf, even against their will. Lenin’s theory of the vanguard party became enshrined as a principle of government (“the leading role of the Party”) which has served to justify what has proved to be the world’s longest-lasting political dictatorship." "

     As recent events have demonstrated Washington has made itself indispensable in the day to day operation of the country. There are no alternate pathways of Governance established. If Washington Fails the Country suffers immediate harm just as occurs in a poorly designed aircraft.