Review of "Understanding Capitalism", by Richard Wolff.
When I picked up this book, I thought it was going to be a sober analysis of capitalism, by a real economist. But what I was met with was something quite different- a Marxist screed with the most flaccid intellectual grounding, disingenuous and dishonest by turns. Wolff apparently has been paid to teach economics at liberal institutions, but this book is evidence that they have little idea what they are buying.
Not that I am unsympathetic. Capitalism is a highly problematic system. But it hardly helps to make statements like: "Given China's huge influence on poverty measures, one could claim that reduced global poverty in recent decades results from an economic system that insists that it is not capitalist, but socialist." Note the squirrely way this is phrased, not defining the economic system, but noting only the wholly outdated self-description. China is one of the most capitalist countries in the world right now, having harnessed naked capitalism (and a lot of stolen IP) to raise its industries and living standard dramatically.
Or how about this, in a discussion of why the idea that capitalism is highly innovative is a myth: "Yet the USSR, for example, exhibited much small business formation on its collective farms, in its service sector, and in its black markets, all replete with competition and innovations." If black markets are evidence of the innovative capacity of socialist economies, then the US is surely headed for Marxism forthwith.
It is almost funny how poorly this book is argued, and how formulaic its critiques and nostrums. But it provides a jumping-off point for a discussion that is a bit more grounded. Wolff casually describes capitalism as just another system, like feudalism and mercantilism, having its day and sure to pass on to some other, better system. He ends up promoting worker-owned cooperatives that are democratically run, where every action is voted on. Needless to say, such ideas have not, and will not, go anywhere. They are simply not practical. For we are, at base, dealing with human nature and the imperatives of existence.
The state of nature (in larger societies) is organized crime- the strong rule the weak, and call themselves noble. Workers are managed by aristocrats (and priests), who make a fetish of not doing any work themselves. The feudal system was an attempt to give some order to this system of relations, by raising the serfs from mere slavery, and mandating some notional reciprocal duties. Capitalism, as even Marx appreciated, was an enormous advance over feudalism, putting the workers and businesses both on firmer legal footing, with a (labor) market intermediating between them. Labor markets have all sorts of problems and biases, but with advances in regulation and labor agitation, it has become for most people a relatively civilized way to exchange labor for money.
Is capitalism still unfair? Yes, grossly so. But let's look two of its most basic injustices. First is that it takes money to make money. If one is born rich, one can be a capitalist and not work a day on one's life. Capitalism puts a high value on using that money to take risks and create businesses. But most rich people are content to buy bonds and sit on their money. What kind of capitalism is that? On the other hand, there is a large industry of venture capital that exists to lure money from the pockets of dentists and other rich people, promising high returns from risky ventures. This is the kind of essential engine that classical capitalism envisions- a tireless hunt for new business opportunities and technologies that will, in the end, make the economy more efficient and raise the standard of living.
Wolff offers a telling example of capricious unfairness in management, where a business brings in a machine that replaces half of its workers, who are fired. He decries the loss of jobs, and suggests that the machine be used instead to fund continuing pay for all the workers. But just in the section before, he had decried the much-vaunted efficiency of capitalism as a myth. It does not sound like a myth here, where more work is done by fewer workers, and those fired workers are then freed to go off into other (presumably) productive forms of work.
Maybe China does a better job using state capitalism to deploy large amounts of capital. Maybe the USSR did a reasonable job, for a couple of decades, in deploying capital to build its heavy industry and arm for World War 2. And maybe free capital markets tend to vacillate between over-enthusiasm and credit contraction. But over the long term, it is clear that relatively free capital markets (with lots of government regulation!) do a good job of finding innovative business prospects and driving efficiency increases over the whole economy. So ... we should definitely think about taxing wealth, and finding ways to make the rich use their money in socially beneficial ways. But the idea that voters, or the state, can do a better job of general capital deployment is not realistic.
A second gross unfairness is management and surplus production. Why are workers still treated like slaves, told what to do, and then underpaid? Sadly, the fact is that management is a difficult job too. We had a worker-run bakery down the street in our city, and it only lasted a few years, because of the inherent problems of not having someone in charge of a business organization. The leading methods of worker-owned corporation now are oriented to giving workers ownership (like the Publix supermarket chain), but not management roles. Workers are on the board, but they do not run the day-to-day operations, because there simply has got to be decisiveness, accountability, and responsibility up the chain of a productive organization. Whether these roles have to be paid a lot more is open to question. But they do have to exist. Even in socialism, political commissars were part of management.
It is worth noting here that while management and unemployment are the disciplining factors for workers, competition is the disciplining mechanism for capitalists (in addition to government regulation). Without competition across the gamut, for labor, for markets, and for inputs, capitalists can abuse their workers and their customers. That is why a renewed focus on antitrust enforcement is an essential part of any progressive program of state oversight over the capitalist system.
As the example of black markets shows, market capitalism is a natural way of organizing human activities and satisfying our desires. But capitalism has plenty of problems. Capital and credit markets can not be left to their own devices. Glaring market failures, like in medicine, show that whole sectors of the economy have no business being capitalist businesses. Capitalism is an engine for turning "externalities", like minerals, air, and creativity, into money, heedless of destructive effects. So capitalism needs heavy regulation and continual reform to tame it into something that provides us with a civilized life. But at its core, it merely expresses our desires, needs, and ambitions, and that core engine needs to be preserved as well.
- When your Tesla crashes, it's your fault.
- Cheap e-vehicles are all the rage.. scooters, bikes, trikes.
