Capitalism Does Not Work

Capitalism is one of those theories that looks good on paper, but in reality just does not work. This is because the main problem with Capitalism is that eventually you run out of other people's money.

Competition:
Because a capitalist economy is competitive, what will always happen is that whoever has an edge over the competition will end up making more money. But making more money does not mean spending more money. A man who makes $35,000 per year will probably have a car and a house, the two most expensive things he owns. A man who makes ten times as much -- $350,000 -- will not own ten houses and ten cars. So what happens in this economy is that more and more money ends up in fewer and fewer pockets.

So, true capitalism will always fail in the end, because you can only get richer if there are other people who can pay you, but the richer you get, the poorer other people become, because there is only so much money to go around. Sooner or later, the money must stop changing hands. (Anyone who has played Monopoly knows what I mean.)

Where Money Comes From:

This is why our economy today uses an infinite supply of money. When the economy starts to slow down, the Federal Reserve (the Head Bank in the US) buys bonds from big banks (a bond is a note that promises to be paid back with interest). Those big banks can then give out loans to smaller banks and companies based on how much money they received for these bonds. This is where most money comes from: It's loaned to us.

But loans need to be paid back. If too many loans go into default, the whole economy can crash. So, banks depend on people and businesses to pay back their loans. People usually get their money by working at a business. And businesses get their money by selling things to people. But when you put businesses and people together, where does all their money come from?

The Poor:

There are plenty of people who can't sell things to other people and also can't find a job. In fact, the economy needs to have these people, because money comes from banks, and even if a poor person could get a loan, how would he pay it back? These people cannot get a job either, because if everyone had a job, the businesses that pay them will not be able to make a profit. For example, imagine there are only two businesses in the world; Business A pays its workers $100 for every box of clothes they make and Business B pays its workers $100 for every box of food. If a box of clothes and a box of food cost $100 each, then each business makes 0% profit and goes bankrupt. If each box costs $110, then each business is making 10% profit, but not for long, because the workers won't be able to afford to buy any boxes at this rate. So instead of raising the price, the businessmen just lay off some of its workers. How does this fix anything? I'll tell you.

Welfare:
Our economy needs people to buy things so that businesses can pay back the banks, so that the banks can make good on their bonds. But businesses cannot hire everyone. That's where the state comes in. The state gives "free" money to the poor, who use this money to buy things, so that businesses can keep making money and pay back their loans. Where does the government get this money? Well, the national debt is incredibly high. But that's ok.

Real Capitalism Has Not Been Tried?
But hold on! If the whole economy is dependent on state welfare, is this real capitalism? The simple answer is "no." At least, this is not what many people think capitalism should be. But we have seen that if a competitive economy is too simple and too honest, then it will fail pretty quickly. We need an infinite supply of money from the top and we need poor welfare recipients to fill in the cracks at the bottom. Notice what the key role of the government is: It declares that the money which the Federal Reserve creates is good money, it forces people to pay back their loans, and it hands out money to the losers at the bottom. Without the government's constant support, the whole system would collapse. This is the way we make capitalism "work" -- by force.

Andy and The Emptiness of Social Justice, Part II: Soft Slavery

     After all his thought, Andy has come upon a stunning realization about ownership and the widespread lack thereof.  There are some basic points which sum up Andy's incapacity to make the difference he thought he could.

1. He is completely dependent on others for everything.

The clear and simple truth about needs is this:  No matter how much money one has, he still gets what he needs from someone else.  Money does not equate to wealth.  Production equates to wealth:  If one has the ability to produce what he needs, it does not matter whether he has money or not, and so long as he can produce what people need, people will give him money for it.  If Andy gives money to the poor and needy, their problems might subside for a little while, but because they are unable to produce anything at all, they will continue to be needy, if not for food, shelter, and clothing then for money to buy food, shelter, and clothing.  What follows from this is that the vast majority of people are needy.  They need someone to give them what they need and they have nothing to trade for it except labor.  A few lucky people might be able to make money without working (just like Andy could by investing his new fortune) but he knows very well that not everyone can do this.  Most people have to work because things need to be produced (and because workers need money), but most people do not produce anything.  "How can this be?" he wonders.  Why is it that most people work but those same people are dependent on others for everything they have, especially the things they need, like food, shelter, and clothing?

2. Others will give him what he needs only out of kindness or obligation.

Everything Andy owns has either come to him as a gift or as an exchange for something else.  He knows that people will be needy so long as they depend on the kindness of others (which usually does not go far).  If he or anyone else is to have any degree of economic security, they cannot simply be charity recipients. Yet the only other way he can get anything at all is by convincing someone that he owes him.  Andy could do this by giving someone money, which is agreed to be worth so much of whatever he wants in return.  Andy has a lot of money currently, but the money he has will be used on consumable things, which means that he will eventually run out of money.  And how does he get more money?  He gets more money by working... for someone else.  The fact about trading is that not only does he get everything he needs from someone else, he even gets his money from someone else.  Before he can trade money for things, he must trade work for money.  This means that before Andy can even think about receiving the things that he wants, he has to find someone to work for.

3. The only thing he can trade is labor.

It is quite obvious that the only thing of value which Andy has to trade is his labor, though his labor has absolutely no value on its own.  In order for his work to be valuable, someone else must decide how he should work, when he should work, and where he should work.  Andy does not really own his own labor:  Before he is hired anywhere, it is understood that whatever his work accomplishes does not belong to him at all.  He has absolutely no say in what to do with his own labor, let alone what to do with the results of his labor.  In exchange for labor, Andy will be paid in money, but he will probably have no say whatsoever in how much money his labor is worth.  If, for example, Andy gets a job making baseball bats, he will not decide what time of day to make bats; he will not decide what shape to make each bat or what color to paint it; he will not decide how much time to spend on each bat; he will not own any of the bats he makes; he will not decide how much each bat is worth; and he will not be paid based on how many bats he makes or how well he makes them, but on how much his manager thinks he should be paid.

4. He does not really own anything.

The fact that Andy does not even own his own labor makes his fifty million dollars seem like an odd puzzle.  Does he not own fifty million dollars?  Well, if by "own" we really mean "can use it however he wants," then no.  If by "own" we mean "nobody can take it away," then no.  If by "own" we mean "can hold it in his hands for a while" then yes, he owns fifty million dollars.  This is how people "own" things.  If Andy buys a beach house and a Lamborghini on credit, then the banks really own those things until he pays them off.  Andy has enough money to buy those things with cash, but even if they are bought and paid for in full, he must still pay to "own" them.  He will still have to pay taxes in proportion to the value of his property.  If he does not pay these taxes, those things will be taken away from him.  Also, depending on the state or town his lives in, there will be many restrictions on how he uses his property, from zoning laws which restrict what the property can be used for to local ordinances which could prohibit anything from cutting down trees to raising livestock.  Thus, not only must he pay to keep his property, he can only use his property in ways others allow him to.

5. It is impossible for him to own anything.

Andy would like to give the poor and needy the ability to be producers, to make what they need and keep it, to acquire basic necessities and to avoid having these things squandered or taken from them.  The hard but simple truth, however, is that not even Andy can have this.  There is no way, not even with fifty million dollars, that he can permanently set himself up with food, shelter, clothing, or any other needs or wants; not because those things get used up, but because he has no way of securing those things for himself.  If he bought a plot of land, built a house, planted a farm, and sewed himself new pants every year, he would still lack two major elements needed for a decent life; security and community.

He would lack security because his land and his house is ultimately State domain:  If he does not continue to pay money to the State for the use of his own "property," the State will reclaim his property. If he uses his property in a way not approved by the State, the state will punish him accordingly.  He would neither be assured to keep his property nor would he have free reign over it.  In short, the only thing "property" is sure to mean is that somewhere there is a piece of paper that associates his name with it.

He would lack community because he could not effectively feed or house or clothe himself without the help of others.  It would be easy to get help if others were trying to do the same thing as him (that is, to really own something) but food and housing and clothing are generally only available from people who want money.  It might be possible for Andy to grow everything he needs to eat and to maintain a house by himself, but that would leave him at a severe disadvantage in the quality of his life, which would easily be remedied if he focused on producing perhaps one or two things he needs instead of everything:  After all, being completely self-sufficient would likely be a hard and lonely life.  Even a self-sufficient man needs community.

If he became a producer of something he could enter the market as a real owner and be able to trade something valuable in place of servile labor.  But community implies a spirit of solidarity in which each member aims to protect the interests of every other member; not out of kindness or obligation, but out of mutual respect.  This community is generally lacking among the few people who actually own things.  In fact, the market is not a community at all, but an arena, a place of fierce competition where the success of one producer is precariously balanced with the potential failure of another.  Andy might be able to become a formidable competitor with a fifty million dollar business, but his goal is not to compete and to win, but to enter into a community and reduce need out of mere appreciation for men.  But because community is almost non-existent, the more people Andy makes producers the less they will be able to compete.

So Andy seems to be left with two options.  Either he tries to make himself an owner, albeit tentatively, and help the market deprive people of property, or subject himself to a soft slavery, in which he is "free" to offer his labor for an arbitrary price so that he can buy what is put in front of him and use things as he is allowed to.

Andy and The Emptiness of Social Justice, Part I: What Fifty Million Dollars Can Teach You

Andy is a sociology major.  He wants to do good.  He cares about social justice and dreams of finding a solution for societal problems, such as drug addiction and homelessness.

For his birthday, one year, Andy receives a lottery ticket as a gift.  He is hesitant, but politely accepts and finds, to his bewilderment, that it is a winning ticket.

Well, what a surprise...

Andy is now the not-so-proud recipient of $50 million, compiled through crushed hopes and desperate irresponsibility.  His friends suggest buying a Lamborghini and a beach house and his family recommends investing in biotech, yet Andy knows that, in order to balance the scales of justice, he must find a way to use this stroke of fortune to help those in need.

Tempting...

He realizes, contrary to his friends’ fantasies, that spending a limited sum of money on luxuries will ultimately result in losing both his money and his luxuries.  Due to taxes, insurance, and the inevitable amount of upkeep a mansion and a sports car would require, it would take not only a gigantic but a continuous flow of income to maintain such a lifestyle. Money is fluid, his parents tell him.

His parents’ advice is to find a way for his money to make money:  That is, if he wants to keep his fortune, he must find a way to produce a fortune.  With so much money, they say, it should be easy enough to invest it in ways that will at least maintain his wealth for the future.  Andy is a thoughtful young man, and this advice strikes him as practical, but ultimately self-serving.  He decides to conjure up a plan to use the money in a way that will benefit mankind, beyond himself, yet in a way that will last like any wise investment.

He considers a few ideas that he has entertained, in the past as only daydreams, yet now very much within his reach: 

He imagines that, were he simply to give away his whole fortune to the poor and needy, it would flow away even more quickly than if it were to be poured into a garage full of Lamborghinis; not because the poor are principally irresponsible, but because money is gone once it is spent.  $50 million could feed an entire country for a year, maybe five years, then it would be gone, and both he and the poor would be back where they started.

Perhaps, he reasons, he could build schools and start scholarships and fund free education.  Perhaps, he reasons, he reasons too much, because the schools he would build would be to empower their students.  Knowledge indeed is power, and the investment he would put into it would likely remain stable, but what kind of power is it?  Education would improve lives by providing skills which would increase chances of employment but, without the opportunity for employment, skills are useless.  He himself is educated and were it not for the grim indifference of luck, he would still be working a part-time job for which he is quite over-qualified.  Education seemed like a noble cause at first, but Andy would like to do more than create candidates for unemployment.

 

Model Employees

If education empowers, but is useless without opportunity, he must create opportunity, he thinks.  But how does one do that?  The needy are in need of a living; the poor are poor not because there is want of charity, but because they cannot support themselves.  Andy is convinced that the answer must be to create jobs.  This is a very difficult problem and he is beginning to understand why nobody else has solved the issue of poverty yet.  To create employment effectively, he must become an employer, he decides.  To become an employer, he must secure a labor-based income for his employees; to do that involves business and production.  The more Andy tries to figure out how to help people, the more his thoughts become entwined in schemes very far from his initial ideas. 

Happy little workers, working happily...

He does not want to believe that creating a business is the surest way to help those in need.  Businesses create value, but they do not generate money.  When a business makes a profit, it is because it takes in more money than its products are worth:  What is an income to one is an expenditure to another.  To create a business would only add one more competitor to the market and might ultimately disadvantage as many people as it would help. 

This much is only speculation, Andy realizes, but he discovers that, when it comes to business in general, some things are certain.  One is that the most successful businesses merely supply what is in high demand and that actually producing those things are, in practice, secondary to making a profit from them.  He also realizes that demand is not often the same as need:  The things we need, like food and clothing, are actually quite common and cheap, whereas the things we demand (i.e. want and pay for) are usually more expensive and hence encourage much business to supply.  If business is the answer, then in order to benefit those who cannot produce what they need, he must supply what others demand, so that he can turn the needy unemployed into employed demanders.

To Andy, this seems to be counter-intuitive, and his suspicion is that it seems counter-intuitive because it is counter-productive.  Why would it not be possible simply to let people produce what they need?  Why could he not somehow turn the needy directly into producers?  Perhaps, he thinks, he should figure out what it is exactly that people need.  He does not think it fair to strive only for the survival of the needy; he wants to encourage a decent quality of life for them as well.  There is certainly a global spectrum of poverty, which ranges from starving expatriates to dispossessed addicts, and even fifty million dollars will not be able to help them all.  Andy begins to become depressed by the thought of a sound fortune with nothing to spend it on.  He decides that five of those dollars can go towards a beer and he makes his way to the local pub.

Later at the pub, Andy beholds a striking revelation as he leaves a fiver on the bar in exchange for his frosty beverage.  He had not even thought of the transaction before he made it, but his new net worth has put transactions in a new light for him; he himself has no way of getting anything, whatever the need or demand, without paying for it.  He could buy virtually whatever he wants, but he still has to buy it.  Why?

Socialism: "You work, we'll decide what you need."

Andy goes for a long walk to mull over this question.  Certainly money makes getting things very easy, so long as one has money, but this is a problem for those who do not have money:  The things that one needs are almost always made for the specific purpose of selling them.  So, if one has no money, he cannot get what he needs.  His last five-dollar purchase has made Andy realize that not even he, with all of his money, can change the way this works.  Necessities cost money, which one makes through employment.  He thinks of a type of employment in which employees are given necessities directly as compensation, but this seems very disagreeable to him, almost like slavery.  Money creates a convenient flexibility of purpose; the choice of what one buys is up to the one who buys it and employers do not have to decide for their employees what they should or should not have.  Of course, employers could not give their employees anything but money anyway, because whatever an employer supplies or produces is usually not a necessity, as Andy has already noticed.  So, he figures that standard employment works best as a money cycle:  Each business sells things to its customers and gives a share of the money to its employees. 

In this money cycle, though, each kind of poverty finds its own kind of problem.  He could fly into some famine-stricken third-world village and hand out hundred-dollar bills, but the money would be useless in a place where there is nothing to buy.  He could approach the homeless in any industrialized city and hand out hundred-dollar bills, but they would likely not spend that money wisely.  He could go to either place, address the people’s needs, and buy things for them, but there are already organizations which do precisely that.  It seems to become more clear to him, but Andy feels that tapping into a money cycle is quite a roundabout way of promoting social justice.  After all his thinking, he is convinced that people should be able to produce what they need, even if the world is too complicated to let that happen now.

When beach houses don't seem like a problem...

As far as what they need, he knows that rations and a tent do not lift a man out of poverty.  He now knows too, however, that three square meals and an apartment do not make a man rich, and neither does a Lamborghini and a beach house.  He knows which of these he would prefer to have, but fifty million dollars have convinced him that the value of money is not relative (as he used to think) but arbitrary.  Money only goes as far as those who want it; that is, it is only good for buying things, but what he buys and why he buys it is up to him and, then again, sometimes it is not.  He has no control over what his money means, just as the poor have no control over what their lack of money means.  If he wants to liberate the poor (and himself) he must liberate them from that which makes them poor; and it is not money.  It is the inability to produce what they need:  It is their absolute dependence on others to supply them with what they need for a price which others determine.

Christmas Meditations, 2014

Ebenezer Scrooge’s biting criticism of Christmas was true on the visible level: “Christmas is a time for buying things.”

The Grinch stole every inane accessory of Christmas festivity in the attempt to cancel it.  The holiday, to him, seemed merely an excuse for noise making and frivolous rituals.

Ebenezer’s conversion was a climax built on the revelation of three distinct truths: His broken past, his hapless present, and his hopeless future.  His conversion was not directly influenced by Christmas themes or traditions; rather, Christmas afforded him the opportunity to reconcile with others.  He did so mainly by giving away what he had previously withheld.

The Grinch’s conversion was effected by a noise.  His preceding resentment centered around noise, but the new noise was different and unexpected.  What grew his heart was the realization that the bobbles and trinkets which he had stolen were accidental to the meaning of the celebration.

Neither “A Christmas Carol” nor “How the Grinch Stole Christmas” are Christ-centered stories; at least not palpably.  Both stories deal with a grouchy person who desires no part in the celebration but are nevertheless wooed into the most excellent participation.  Both stories are quite predictable.  Why?

In both stories, the villain protagonists would have been correct in their judgment if their estimation of Christmas had been correct.  They scorned what they saw and heard.  There was something hidden from them and their lack of knowing that thing made them villainous.  In one sense, it was through much labor that both characters were changed.  In another sense, it was something very simple and direct which changed them.  Scrooge saw his grave.  The Grinch heard a sound.

Dr. Seuss’ story is much simpler than Dickens’ (and this should be obvious, as it was written for children).  The moral of it is nonetheless important:  Trees and carols and presents are celebration enhancers.  They give expression to the meaning of the celebration.  The meaning itself should be enough inspiration to hold hands and sing out in joy.

Ebenezer’s journey to the light of Christmas is much subtler.  His vice is singular and apparent, but the means by which he is freed of his greed shows that he is a complicated character.  He is forgetful of his past and in denial of his social condition.  He not only fails to see the meaning of Christmas; he fails to see himself.  It is by seeing himself that he is changed.

Reality is much more complex than stories but, by simplifying reality into story-form, we can understand it better.  If Christmas does not inspire us to hold hands and sing out in joy, regardless of what gifts we were given, than we have problems.  Our problems are Scrooge’s problems.  Scrooge’s problems are the Grinch’s problems.  We perceive things but remain ignorant and in our ignorance we hold false attitudes towards those things.  This holds true not merely for stuff, but for ourselves also.  We forget who we are, where we came from, and where we are heading.  The truth is what changes us, if only we see it.

We are, each one of us, broken.  We live in uneasy company with the rest of the human race.  We are all, right now, losing time until death.

The trouble with us modern-day misers is that not only do we fail to see the facts, we fail to see their relation to Christmas.  The funny thing about misers, like the pre-repentant Scrooge, is that they neglect themselves in order to store up wealth:  The wealth they store up is used for no worldly comfort or what might be deemed frivolity.  What they sweat and strain to accumulate is no more than the feeling that they need not worry.  Whatever dire necessity they need, money will buy it.  In a way, we are all misers.  We neglect things we perceive as inane for the sake of feeling OK.  Well, the joke is on us.  We sell ourselves short only for the facts to remain:  We’re screw-ups, we’re alone, we’re going to die.

There is good news for those who will hear it.

We are, each one of us, broken.  We are not, as a species, broken.  We live in uneasy company with each other, but we are united in the prospect of peace.  We are all, right now, losing time until death, yet death is unnecessary.

What insane paradoxes!  I am broken but unbroken. My enemies are my friends.  I must die but I do not have to.  How could they make sense?  For Ebenezer, the answer must have been obvious. 

The moral of both stories, so often echoed by so many Christmas films, are often presented to be, “don’t be a stick in the mud.”  A child might accept such a moral without question and so, for lack of thoughtful adults, Christmas becomes just another “kid thing.”  Be jolly, give out lots of presents, and pretend that sometimes magic exists.  Seeing and hearing amount to things beginning to look a lot like Christmas and Silver Bells on every street corner.

“Noise, noise, noise…” says the Grinch.

The joy of Christmas which changed hardened hearts cannot have been Bing Crosby’s dulcet tones.  It must have been something a little more serious.

If there is a God, the facts are worse.  Not only are we broken, but there is someone we must answer to for all of the crappy things we have done.  Not only are we at war with the world, but God is watching it all go down.  Not only will we die, but God will be there… waiting.

Then comes Christmas.  God decides to become one of us.  He is born into the world as a flesh-and-blood human being; a messy, puny little baby.

God, master of the universe, is cold.