Saturday, November 26, 2005

Balancing Capitalism

Troutsky has my wheels turning again, as always. In a discussion over at his own Thoughtstreaming, he asks: "...why does capitalism tend towards monopoly?"

He goes on to answer his own question. "If it is an intrinsic tendency (as I believe) and markets are simply a clever, manipulative device to channel wealth and support for them is embedded in a power structure extremely resistant to change,the best reformers can hope for is Keyensian initiatives designed to avoid social unrest.The mechanisms (such as a bloated bureacracy) can be as bad as the cartels, in terms of democracy and freedom."

I must confess, I know little of Keynes. I attempted to read one of his books, as recommended by Saving Aeneas, but found it so dry and dull that I could not get through it. If anyone knows of anywhere I could get a quick round-down of Keynesian economic theory I would greatly appreciate it. Claiming ignorance then, I will not discuss Keynes, but merely throw in my own two cents in another manner.

The key with capitalism, as with a most things, is moderation. On one hand, the system must allow for growth. A business that provides an economic good or service at a viable price should be able to expand. If I, for example, can make and sell widgets cheaper than anyone else on the market, and if my widgets are good, I will go far. Further, as long as I am not paying my workers insufficient wages--a matter of subjectivity--it behooves society to let my widget making spread.

This, of course, is where monopoly comes into play. Ignoring the strong possibility of a decrease in the value of the monopolized product, which is surely a bad thing, does monopoly itself pose a problem? Troutsky seems to suggest that it does. Insofar as a monopoly is total, he is most certainly right. If a monopoly is incomplete, however, the water becomes a bit muddy. Lacking the time to calculate the exact formula for such a thing, I will make a generic statement that seems to fit the bill. The government's role is to ensure that the market remains competitive. Doing so will often cause it to limit monopoly.

This is where I have a bit of a beef with the true libertarians. The whole of libertarian philosophy is founded on a solid principle. Man is corrupt, and the more power he has, the more corrupt he will be. Lord Acton's famous maxim is merely the doctrine of original sin applied. Understaning this as they do, it is unfortunate to see them apply the rule to its full extent. For though the government if given too much power will become corrupt, so too will the private sector. A free market is a wonderful thing, but it is like something of a fairy tale. Remove the government and there is nothing to stop one corporation from ruling all. You will have replaced the tyrannical rule of the government with the equally tyrannical rule of the corporate elite. At least in this democracy of ours we have a vote.

This brings us back to the moderation I mentioned earlier. The government must not be too weak, as the true libertarians would like or we have the articles of confederation all over again. Better still, we would have the industrial revolution, complete with Standard Oil and the like. At the same time, the government must not be too strong. It is possible that a very strong government could stifle growth. But even a government that is not as strong as that of a totalitarian state can still cause problems. We have such a government in America today. Although the feds do have the power to regulate the private sector, they instead cater favors with the corporations. At least in a "free market", the corporation which rises to the top will have done so because of the viability of her good or service. In today's system, it seems to be based more on an insidious ability to cater to our wonderful elected servants.

The whole trick, then, is a balancing act. The government must fit into the nice seemingly conflicted edges of a paradox. It must be strong enough to prevent the private sector from ruling all. It must also be weak enough to never be able to usurp all the power for itself. It must not become an attractive whore, with which businesses will lie down with--for business, and especially big business, is amoral. But it must not be too pathetic to fight back against the dirty capitalists who would have their way with the rest of us. It must be a protector and a defender, indeed, a great hero and not a whore, but one with the dignity and humility to rule justly for ages to come.


troutsky said...

I think you have nailed the liberal project(in the Enlightenment sense) right on the head.A system of checks and balances, as you suggest, in effect balances the conflicting "nature" of man.The question is, what factor was left out that creates the current imbalance (if you agree it is out of whack),what institution needs re-design,what theoretical aspect did not get the attention it deserved and did not get expression in our constitution, Bill of Rights or other working documents? Comparing the French revolution to their own,they wanted to extend yet control the power of the "people" or the multitude.Still our problem,eh?

A Wiser Man Than I said...

I've thought about this one a lot. What did the founders do wrong, that we could have done better. Usually, I come up with the conclusion that government simply tends toward corruption. It is a pessimistic conclusion, but I think it is the right one all the same.

Nonetheless, there are a few things we could do to change the current system so that it would be less broken. First, the Supreme Courts power must be curbed. I'm not saying we need to completely scrap judicial review, but Congress should make the law, not the high court.

Also, term limits need to happen, and soon. A balanced budget amendment would be a good improvement as well.

There should be something we can do to get all the money out of Washington, what with lobbyists and the like. I don't know exactly what to do on that front, though.

Oh, and enacting these measure should be fun. Woo for third parties.