22 December 2015

Capitalism


I should begin by reviewing my qualifications to discuss this topic.  I have no background in finance or economics.  Those who read this blog know that my background is in philosophy and theology, specifically Thomist theology.  Nevertheless, being an educated citizen of the United States who has read a little bit of political philosophy and discussed these things more than a little bit, I'd like to devote some time to thinking about Capitalism: what it is, how it should be understood, and how it can or should be practiced.

1.  It seems clear that the "obvious" definition of Capitalism in the air (i.e. the one which occurs most readily) is something like this: Capitalism is a model of commercial activity in which the maximization of profits is pursued as the primary (or even exclusive) end of business.

2.  I have described Capitalism as a "model", instead of calling it a method or philosophy.  Capitalism, under this definition, is not a set of procedural rules which dictate behavior, nor is it a set of metaphysical propositions.  Instead it is a way of understanding or imagining a set of contexts, objects, and behaviors.  It's a practical lens through which commercial activity is viewed, which filters out the elements extraneous to the model.

3.  Capitalism is a self-limiting practical model.  It covers only a single domain of behavior — commercial activity, the exchange of products and services on the basis of a strict agreement (rather than on the basis of friendship or community trust).

4.  Capitalism is not a philosophical system (though Ayn Rand has developed a philosophical system based on capitalist tendencies), in that it has nothing to say about moral questions, or the constitution of the real, or the nature of human understanding.  If one wants to use the Kantian jargon, we could say that Capitalism is based on the hypothetical imperative: If one engages in commercial activity, one ought to maximize profits. 

5.  What are "profits"?  The notions of "profit" and "capital" are central to Capitalism.  A profit is the value gained through some commercial activity (whether a trade or an investment) over and above the amount of value expended on the activity.  What is Capital?  The notion of capital is based on the recognition that the exchange value of a commodity depends on the extent to which it is desired by people who are available to trade for it.  Capital is, in the most general sense of the word, the assets controlled by a particular person (or group), understood solely in terms of their exchange value.

6.  This enables us to restate our original definition in different terms: Capitalism is a model of commercial activity in which we attempt, through labor, exchange, and other means, to maximize our assets, considered in terms of their exchange value, and pursue this maximization as the primary or even exclusive end of commerce.

7.  In the United States, since the outbreak of the Cold War, Capitalism has been frequently contrasted with "Socialism" or "Communism".  It is often true that the meaning of a given term changes when it is placed in opposition to another term, and this is certainly one of those cases.  When one speaks of "Capitalism vs. Socialism", usually the disjunction has little to do with the understanding of Capitalism we have described so far.  Socialism is not a model of commercial activity but has to do with the distribution of ownership.  "Capitalism vs. Socialism" is a dispute about the best way to organize the distribution of ownership in society, not about the proper dominant model for commercial activities, though the two issues are related.  (The difference in meaning between Capitalism in this case and Capitalism considered in itself can lead to confusion and equivocation.)

8.  Capitalism and the Capitalist.  By the definitions we have given above, the Capitalist is simply an engine for profit maximization, whether he acts for his own sake or for the profit maximization of a firm.  Creativity comes for the Capitalist in the interpretation of trends and circumstances, the identification (and construction) of advantageous possibilities, and the anticipation of future outcomes.  Capitalists approach a chaotic world of resources and interests and attempt to transform it to their own advantage, whether as organizers of productive labor and resource distribution, or as conduits through which resources flow between various buyers and sellers.

9.  It is obvious that commercial activity does not occur in a vacuum, independent of other human realities.  This is most obvious because the exchange value of any commodity is ultimately derived from its impact on the ability of concrete individuals to fulfill their basic needs and aspirations, and to find enjoyment.  Frequently this fundamental fact about the exchange value of goods is obscured by the complexity of the system of exchange and the variety and abstractness of some commodities.

10.  Commercial activity is founded on human interests and on the organization of human society.  As a subset of human activity, commercial activity falls under human sociability, and like all other social behavior it is circumscribed by expectations about the justice, good-will, and truthfulness of those involved.

11. Once we realize that we can look at commercial activity within a larger context of human behavior, it becomes possible to assess it by broader standards of reasonableness than those provided by the Capitalist model.  Consider the following example.  Under Capitalism (as defined above) civil law can be thought of as a restriction on the possible means of profit maximization imposed by force, or as a regulatory stabilization of the process of exchange.  But when we look at the laws regulating commerce, considering commerce as a social behavior which occurs within stable communities whose existence is dependent on the maintenance of a fair distribution of basic resources and the promotion of the common interest, commercial regulations cease to be brute-force impositions or even merely market-stabilization strategies, but are seen rather as instruments for the guidance of one variety of human social behavior toward the benefit of the society as a whole in which that behavior occurs.

12.  There is something peculiar about Capitalism as a model of commercial activity, even considered merely as such.  Commercial activity is not, except in the most extreme cases, purely impersonal.  It involves the cultivation and maintenance of personal relationships, within a particular firm and between firms, between merchants and customers, etc.  These relationships are essential to commercial activity, not because they enhance profit-maximization (though I imagine they do), but because commercial activity cannot take place without them, and even more so because they are aspects of the higher goods to which all social activity, including commercial activity (being founded on exchange value, which is ultimately derived from human interests) is directed.

13.  Capitalism (as defined above), in other words, is a model which treats commercial activity as a non-social behavior, or as a social behavior which occurs in the absence of the broader norms and human concerns that motivate social activity and govern it in communities.  One can describe this abstraction in various ways.  David Graeber traces it to the relationship between occupying armies (who pay their debts in coins made from the spoils of war) and occupied peoples, who are required to pay taxes to the conqueror in coins he has issued.  In this relationship the norms which bind and govern communities do not exist.  The relationship backing the exchange is characterized not by friendship or goodwill, but by simple domination.

14.  The martial analogy is not entirely fair, because commercial activity according to the Capitalist model is not based (primarily) on the threat of violence so much as the manipulation of human interests.  Nevertheless, Graeber's genealogy of the modern understanding of capital is illuminating.  The transformation of Graeber's martial interpretation of Capitalism into something adequate to the realities of modern Capitalism (as defined above) is analogous to the transformation necessary to change power as it functions in Machiavelli's political vision into power as it functions in the work of Michel Foucault.  For Machiavelli, political power is primarily about military domination, the seizure and redistribution of resources, and the cultivation of an imposing image.  For Foucault, power is about facilitating the emergence of value distinctions and then participating in the organization and transformation of other elements as they flow between various poles of value.  Power is about significant differences and the organization and exploitation of tensions created by those differences.  In this way, for Foucault, power is more about exchange than domination, and more about facilitating the flow of resources than determining their global distribution.

15.  Such a vision of Capitalism is unappealing because in it the mechanics of Capitalism as a mode of action become divorced from the practical human interests which underlie all commercial behavior.  The abstraction is inhuman, and therefore to some extent divorced from reality.

16.  I began this reflection with the intention of describing an alternative model of commercial activity, closely analogous to Capitalism, but without the inhuman abstractness which is the perpetual bane of Capitalists (whose speculative activities seem to perpetually spiral into the realm of fantasy, presumably because the Capitalist model divorces the profit motive from the underlying real and human considerations of business).  Now that I have reached this point, though, it's clear that doing so would require more work than I'm ready to put into this reflection at present.  So, instead of a description, I will set down a few leading questions that seem worthy of further examination.

17.  The profit motive is, in contemporary Capitalism, the primary goal for commercial activity.  What would happen if that Capitalism were supplanted by an alternative Capitalism, in which commercial activity was motivated by the desire to maximize the productivity and social value of a particular enterprise?  How would one go about creating an honorable business culture in which such a motivation became normative, and those who pursued private profit without due consideration of social value or productivity were penalized?  What sort of education would be necessary?  Is it possible?