Capitalism and Crisis

“Four-alarm fire in downtown Moscow clears way for glorious new tractor factory.  And, on lighter side of news, hundreds of capitalists soon to perish in shuttle disaster.” – Airplane II, The Sequel

COMDOG

I know how they feel.  When my alarm goes off late – I end up Russian all morning.

Capitalism is a great system for allocation of winners and losers in an economy.  It does this more or less automatically, because the transactions are voluntary on both sides.  If I want weasel snouts and have money, and you have weasel snouts and want money, as long as we can come to an agreement, we both win.  Nothing better than a warm weasel snout on a cold night.

Capitalism is good at creating rewards for those win-win transactions.  Because it’s good at that, capitalism is probably the best creator of abundance the world has ever known outside of Bernie Madoff.  Capitalism is also set up to be very compatible with those on the Right.

Transactions are based on free will and free exchange of goods, even transactions for things like natural gas.  Here in Modern Mayberry, if I don’t want natural gas, I can cut firewood and burn it to heat my home.  My insurance company would probably prefer me to get a fireplace first.

But natural gas is amazingly cheap because, thanks to capitalism-inspired innovation, it’s abundant.  I would be foolish to try to heat water in my house over a wood stove in summer when I can spend the $12 or so a month for hot showers.  I choose that because of free will, and also because I don’t want The Mrs. killing me in my sleep.  I think that was one of the things on her list before she accepted my marriage proposal – “Does he sleep heavier than me?”

SOCIALISM

Veganism is like socialism.  They’re both fine, unless you like eating.

Capitalism has positive incentives – make someone else happy with the transaction, and you win.  If you do it in a significant enough way?  You can win bigly.  If you don’t win bigly?  You can at least do better than your parents.

That has been the fuel of what we’ve called the American Dream, the idea that you could have your own struggle and the outcome is determined largely based on your effort, along with a bit of luck.  Heck my boss gave me a raise yesterday.  He said he wanted my last week here to be happy.

The United States has been a place of abundance for the last 75 years.  Have there been recessions and setbacks along the way?  Certainly.  Has there been poverty?  Absolutely.  I like to do my best to fight poverty, but I’ve found the homeless aren’t very good at wrestling.

RAMEN

Where can you hear songs about poverty?  Singapore.

One of the things that has been proven by President Johnson’s attempt to make a “Great Society” is that, despite trillions in .gov spending on poverty, it will always be with us.  Even before Johnson’s “Great Society” program, the poverty rate had dropped to below 15%.  That’s why a Mercedes-Benz® and poverty are the same:  Princess Diana couldn’t stop either of them.

Since 1966, poverty has bounced around between 11% and 15%.  Perhaps, in some fashion, these programs have prevented higher levels of poverty during recession?  It is certain, however, that we didn’t even have an official poverty measure until 1959.

The structure of the economy, however, began to change.  A typical factory job, obtainable with a high school degree, provided enough money for a house, car, and necessities for a family.  Note I said job – wives working was something that happened before the kids were born and after they were in school, at least in the growing middle class.  The middle class has learned that, while money can’t buy happiness, poverty can’t buy anything.

Even though a typical family is now supported by a working husband and wife, things had been good.  At least some of the additional wages from both spouses working went to an upgraded lifestyle – capitalism was more than happy to provide new things to buy with the income, like Zima® wine coolers and Dan Fogelberg™ CDs.  Capitalism had taken us from the scarcity and hunger of the Great Depression to abundance and humongousness of actual obesity caused by an abundance of cheap, excess calories.

Although it’s trivially easy to prove that communism is nearly certainly the most evil system ever devised on the planet, capitalism has its faults, too:  Capitalism has no soul.  It is a blind force that will sell you anything, even if it’s something bad for you.  Taken to an extreme, capitalism will provide more than just immoral items, it will provide things that are illegal.  And never mix Islam with capitalism – they don’t like profit jokes.

Capitalism also provides incentives to manipulate.  Advertising does a wonderful service when it makes us aware of new products that can help us, but advertising can manipulate desires, like Edward Bernays’ propaganda campaign to convince women (who didn’t smoke at the time) that smoking cigarettes was exciting and fashionable.  Now?  Type “women smoking” into Google®, and you’ll get 810,000,000 matches.

Another fault of capitalism is that it produces products that are designed to fail.  Want your iPhone® to last five years?  Good luck with a battery that lasts only three.  Apple™ did one better:  it made software changes that slowed older iPhones™ down.  Why?  To get you to buy a new iPhone©.  I did click on one of those, “You just won an iPhone®” pop-ups.  Thankfully, it was just a virus.

IPHONE

It could be yours, for only 36 payments of $375,221.43.

Making your products bad isn’t new.  Lightbulbs, when initially manufactured, lasted too long.  A cartel devised a standard that made sure that light bulbs were constantly failing.  Why?  So you would have to buy more.  Another example?

Two words:  printer ink.

Those failures of capitalism, however, are a symptom of abundance.  People can afford those things, so companies do whatever they can to get as much of their money as possible.

I fear our economy may be slipping into scarcity.  Not next week, not next month.  But as we see increased tensions, the possibility of prolonged outages of things we take for granted are likely.  Higher rates of unemployment are likely, too.

There is a sign that the government attempting to prop up the economy is starting to create disastrous distortions.  From today’s news, this story (LINK) describes how the Federal Reserve’s® pumping of trillions of dollars into the system is having the effect of blowing bubbles in the economy.  Color me surprised.

Abundance of the “one income for a family” type is gone for many professions, if not most.  If the Fed™ decides that it wants to keep blowing bubbles with trillions of dollars just made up on the spot, the result will be inevitable:  a currency reset.

People will blame this on capitalism.  I won’t.  The condition we find ourselves in is the result of decades of currency manipulation.  You can’t print money forever without an impact.  What we will be left with is a contracting economy.  What system works best in an economy that’s getting smaller, not larger?

I know what will be sold – communism.  The reason people keep falling for this one is in times of difficulty is that they believe that it will solve their problems.  The reality, every single time, is that communism will end in murder, scarcity, and hunger – it’s like a game of Russian roulette, but in this game a few hundred million die.  But, hey, maybe this time?

FAILED

Unemployed leather workers have nothing to hide.

Capitalism has been the only reliable way to deal with economic crisis in the past.  The incentives it provides minimized the hunger and the pain of the Great Depression.  But it’s not the “capitalism” we see today.  The people of the United States in the 1930s helped each other, and capitalism was a way to run the economy, not the highest moral good.

Was it a massive Federal program that saved people during the Great Depression?  For the time during the Great Depression, the spending of the Federal government tripled compared to years before the Great Depression.  In my reading, the Federal government enacted thousands of policies, many contradictory to each other.  Unemployment was still 14%+ when World War II started.  The war clearly ended the Great Depression.

But people helped each other back then during the Depression – Great Grandpa and Grandma McWilder even took in kids from families that couldn’t afford to raise them.  The United States was a far more united place, and the shared morality was more than a shared economic morality, like we see today.  Did you get aid only if you were moral and upright, or a widow?

AGAIN

If you get to choose what Hell to go to, pick the communist one.  It will be out of coal and molten sulfur.

Yup.  If you could work, you were expected to work.  But yet, in 1950s America before the advent of our current bouquet of welfare programs, did citizens let people starve?

No.

The best answer is capitalism, but a smaller, more local, and more moral version of it.  Nearly every problem we have in the United States was created by increasing power in a large central state and huge metropolitan areas.

More on that in Friday’s post, where we’ll talk about how the problems created by modern life are more than economic.

Author: John

Nobel-Prize Winning, MacArthur Genius Grant Near Recipient writing to you regularly about Fitness, Wealth, and Wisdom - How to be happy and how to be healthy. Oh, and rich.

23 thoughts on “Capitalism and Crisis”

  1. Actual capitalism sounds like a great idea but I haven’t ever lived in a capitalist system in my 48 years, and neither has anyone reading this. Our economic system is made up of winners and losers depending on who does a better job bribing Congress. It is like a fantasy football league. You can pick the third string punter because he is a nice church-going fella, but he won’t generate a lot of points, so you pick the star running back who smacks around women because he is good for 150 yards and 2 touchdowns on Sunday. Being an “ethical” politician is a great way to not get re-elected. Corporations bribe Congress and Congress extorts corporations. Peter Schweizer has a couple of good books about this, one titled “Secret Empire” that exposes how corrupt the Biden family is ( https://www.arthursido.com/2018/04/book-review-secret-empires.html ) that came out before Biden lost his marbles and another called “Extortion” ( http://thesidos.blogspot.com/2013/12/book-review-extortion.html ).

    Capitalism, like libertarianism, would work great in a small, homogeneous, high trust society. In a multicultural nation of 350 million people? Nope.

    1. Capitalism, like libertarianism, would work great in a small, homogeneous, high trust society.

      Socialist organized criminals are coddled by “capitalists” because most “capitalists” are socialists, not libertarians. Technology is a force multiplier. Because of diminishing returns, the individual gets more advantage from a multiplier than a big group does. That multiplier is constantly increasing by technological growth. Imagine fourth generation war in an age of drones. How will big city populations keep their electric power on, when drones can drop strips of aluminum foil on power lines? I predict the sudden ending of organized crime.

    2. Capitalism, like libertarianism, would work great in a small, homogeneous, high trust society.

      Socialist organized criminals are coddled by “capitalists” because most “capitalists” are socialists, not libertarians. Technology is a force multiplier. Because of diminishing returns, the individual gets more advantage from a multiplier than a big group does. That multiplier is constantly increasing by technological growth. Imagine fourth generation war in an age of drones. How will big city populations keep their electric power on, when drones can drop strips of aluminum foil on power lines? I predict the sudden ending of organized crime.

  2. The key to capitalism is failure. Ultimately capitalism produces products that are purchased in an open market. Some products do not find sufficient buyers to allow their continued production. Those products fail. Failure hurts. Providers of capital lose wealth and providers of labor lose their livelihood and jobs.

    For capitalism to succeed, failure must be allowed to occur as a natural, inevitable and required outcome.

    American life today is about the avoidance of failure on any level.

    This is going to lead to a failure on every level, probably sooner rather than later.

    Rejoice at the apocalypse! This reset is exactly what is needed to return to the basic level of selling boxes of apples amid piles of rubble. And the return to failure as a fact of life.

    http://exhibitions.nypl.org/lunchhour/exhibits/show/lunchhour/charity/hard

    When a senile presidential candidate is explicitly using “the end of shareholder capitalism” as a literal campaign slogan, it’s time to revisit our upcoming world of The Hunger Games…

    https://onezero.medium.com/everything-is-the-hunger-games-now-42161053708a

    1. I agree with most of what you wrote, but the problem is that the crisis we are heading towards is intentional. Those in charge have brought in 3rd world hordes, juked the economy, and tried to destroy our culture precisely to bring about a situation where people will be crying out for order at any cost. This is how they brought about the USSR, it is what they’ve been doing to Western nations for many decades. Check out Yuri Bezmenov’s videos on youtube. He was a KGB defector from the 70’s who outlines the Soviet plan to destabilize America, which the Left has continued.

      It is highly unlikely the ‘reset’ you mention will be allowed to happen. Instead we’ll get global USSR for a long time, with a slow slide towards… something worse than even a pessimist like I can imagine. If such a ‘reset’ does happen in spite of the elites intentions, it won’t magically allow for Good people to survive at higher rates than Bad. If anything, history shows the opposite. Such times lead to 3 types of survivors: brutal leaders, those who toil for brutal leaders, and those who enforce the brutal leaders orders to keep the previous group toiling. This assumes we don’t have such a massive die-off that everyone reverts to a hunter-gatherer lifestyle, which is a possibility.

      1. I love those videos – they’re wonderful. Yuri really sets out the KGB plan. It’s a shame the plan kept working after the KGB collapsed.

        I don’t think we’ll get to a global USSR – there is considerable push back against that. Marxism in the US, in a collapsifornia? Maybe.

        Not everywhere, though.

    2. So, crony capitalism, pure capitalism . . . and . . . third choice . . . ethical capitalism.

  3. We have a strange form of capitalism, in general we borrow green paper and give it to other people for stuff. We do this en masse and we know no other way to be. That was the gift of victory after WW II.

    Our “exorbitant privilege” is going to crash because of absolutely out of control printing of the green stuff in expectation of goods, and the perception abroad that our nation is clearly going insane.

    1. Thinker – I 100% agree. We’ve been taxing the world for 75 years with the dollar. One day, they’re gonna get wise.

  4. I’d be happy to see any form of government that actually respects the Rule Of Law. People are actually pretty good about writing up systems of laws that they can live with, whether it’s American capitalism, Swedish socialism, or Ottoman sharia. It’s the yawning gap between the law and society that makes us poor, because every system produces powerful elites who evade the law for the benefits of themselves and their extended families. The crucial question of any proposed system is “who decides?” and the genius of capitalism is that we all do, when we “vote” with our purchases.

    I’ve been reading a fine little book: “How the Irish Saved Civilization”. Regardless of how the Irish saved civilization, the early chapters of the book describe how the Roman Empire got to the point of abandoning civilization. (You might ask, “what is civilization, anyway?” Start with reading and writing, counting and geometry, then history, philosophy, etc. in order of decreasing importance.) Check it out. I think the readers of this blog will find resonance.\

  5. Capitalism is similar to communism in that it only works if everyone believes in it. Capitalism gets far better results because it is much more in line with what people want to believe in. All you have to do is follow your self-interest, and do what maximizes your efficiency in order to be competitive. Communism demands that you believe in acting for the benefit of a group over your self-interest, which generally ends poorly above the village level of organization.

    The problem with capitalism is that once an entity becomes rich enough, the best way to maximize competitiveness is to eliminate competition. Whether through monopoly or bribing government, this becomes the path of self-interest, and in order for capitalism to keep working it requires such super rich entities to act for the benefit of the group over its own self-interest. Note this is the same problem as communism, but only for a few people and only at a later stage.

    People who say “modern America isn’t real capitalism!” are similar to those who say the USSR or Venezuela “weren’t real communism!” In both cases, that is the end state that will inevitably be reached due to the inherent flaws within each system. It is absolutely “real capitalism!” and “real communism!”

    Solution:
    Heck if I know. A good starting point is realizing that nothing written on paper can be anything other than a rough guide. Culture and morality must exist for a decent nation to survive. Words on paper do guide that morality and culture, but they guarantee nothing. To paraphrase one of the Founders, “Our system only works for a moral people.”

    1. You sir are totally correct. I think lots of people could produce a better OS than win 10. Good luck getting that a fair place in the market

    2. No, I think we have nearly a pure capitalism, and that’s the problem. Everything is about the $, and there Khrushchev was right: we would sell the Soviets the rope to hang us.

  6. Capitalism, like libertarianism, would work great in a small, homogeneous, high trust society.

    Socialist organized criminals are coddled by “capitalists” because most “capitalists” are socialists, not libertarians. Technology is a force multiplier. Because of diminishing returns, the individual gets more advantage from a multiplier than a big group does. That multiplier is constantly increasing by technological growth. Imagine fourth generation war in an age of drones. How will big city populations keep their electric power on, when drones can drop strips of aluminum foil on power lines? I predict the sudden ending of organized crime.

  7. Re – the cartoon with capitalism on the board – our esteemed ‘education system’ has so brainwashed far too many into believing that they do not have the ability to simply back up – very slowly – and viola – problem solved.

  8. For example, your leftists in [the] United States: all these professors and all these beautiful civil rights defenders. They are instrumental in the process of the subversion only to destabilize a nation. When their job is completed, they are not needed any more. They know too much. Some of them, when they get disillusioned, when they see that Marxist-Leninists come to power – obviously they get offended – they think that they will come to power. That will never happen, of course. They will be lined up against the wall and shot.

    KGB defector Yuri Bezmenov aka Thomas Schuman

    1. Yup. Yuri says they go first. Why? You and I love our country and were faithful to it, they can work with that.

      But the Soviets always shot traitors . . . .

  9. I temporarily reside in a rural area of these united states of America.
    This residency gives me ‘First Worlder Privileges’.

    If I visit a city — frisco, los angeles, de troit, chicago, baltimore are examples — I shed those privileges and automatically acquire ‘Third Worlder Privileges’.
    How fun!

    Based on my experience, Third Worlder Privileges include:
    * the opportunity to sharpen my ‘head on a swivel’ skills, and
    * the opportunity to develop my hand-to-hand combat skills, and
    * the opportunity to assess city-folk as either a) murderous bastards or b) murderous bitches.
    See?
    Cities offer plenty of opportunities!

    Extrapolated, the remainder of this collapse offers the opportunity to sharpen my hunter-gatherer skills while broadening and deepening my tribe-building skills!
    And all thanks to those Federal Reserve Bankers!

    1. We should pay those bankers for such wonderful privileges. We need to get them the proper prize for what they’ve done.

      Hmmm.

  10. Central bankers are central planning of the economy. Where have we heard that before?

    As you say, when the dollar collapses, they’ll blame it on capitalism but in reality it’s the closest thing to communism in the country.

    1. Wonder how we could get rid of them? Oh, we did? for nearly 100 years? And just lived with gold and silver money?

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