Bounded Capitalism

I so badly want to be an anti-capitalist. That’s the left wing ideologue in me.

But I just don’t see that it’s pragmatic. We have to live in the world that we live in. That world is one that has been dominated by capitalist economic philosophy and global trade for hundreds of years. Global capital has been tremendously destructive and outright murderous and violent.

But capitalism was a response to the world exploration, exploitation, and wealth extraction of monarchies. Kings and Queens could fund voyages to send explorers to conquer distant lands that had access to resources and goods that could be stolen and sold to benefit the monarchy. The church would grant monarchies the rights of ownership over distant parts of the globe to legitimize their pursuits.

Capitalism is just people within a kingdom without the abundant wealth and religious permission to fund conquests. But, obviously, people still wanted to go claim ownership over trade commodities for their own profit. Eventually, a burgeoning merchant class was able to pool their resources and fund expeditions of their own.

And through outright violence they claimed a series of islands and committed a genocide to dominate a global spice trade.

Capitalism is just pooled financial risk in pursuit of profit. It is the idea that people can spend some money today and it will pay off in the future with more money.

I think the real bastards lie within how capitalism is regulated.

Because, capitalism alone is not inherently evil. A hallmark of capitalist economic theory is competition. Competition can be good. If you build houses and several companies have to compete with each other to sell you hammers, that competition will ensure that you have access to high quality hammers on the market at an affordable price.

It isn’t inherently evil that individuals who are willing to take a financial risk, to invest their money into a venture, should be rewarded for their perseverance if that venture provides us with a needed good. I have a friend who once worked for an AI company that was trying to create a model that could improve and speed up cancer screening. Improvements in early detection will improve survivorship. That’s awesome. That is certainly a risk. You don’t know for a fact that that will work. But, if it does, I certainly am grateful for that risk and believe that individual, or those individuals, should be rewarded.

But what becomes a real monster is unregulated capitalism.

Unregulated capitalism gave us the profoundly brutal system of chattel slavery and the triangle trade. If there is no ceiling on how much you can be “rewarded,” i.e. how much you can profit, than, if your only goal is profit, you’re going to pursue the cheapest labor possible, enforce that labor through violence, and pay as little as you can for the product you sell. For example, let’s say you want to sell cotton on a global scale. Maybe, just maybe, through violence, you’ll steal the land of an indigenous population living in the southeastern United States and protect your claim to that land through further violence. Then you’ll establish a plantation built on free slave labor and ensure continued labor through violence.

All of that was allowed. It was all legal. The Dutch East India Company and British East India Company were legally allowed to everything that they did. So we’re plantation owners in the US, and in Haiti, and across the globe.

Anyway, let’s think about this moment in time again.

We are in a moment that is increasingly referred to as late stage capitalism. Essentially, the markets that sustained early capitalist expansion (e.g. tobacco, spices, cotton, etc.), while still existence, are oversaturated. New markets have always emerged and have been dominated and then oversaturated and then left in the past to smolder. AI is the big market now. They’re increasingly services like ride shares, food delivery, social media, etc.

Our global order is dominated by capital. Everything has become a market. Markets spread to cover every way that we organize the deliver of human needs. Our health care system is a market. Our education is a market. Our care for children and the elderly are markets.

Everything that would have been considered a public good to be administered by the state has been turned over and given to markets.

And the only goal of a market is to profit, maximally. Markets reduce the input costs by minimizing quality and labor and maximize profits by increasing price. Then they do everything in their power to eliminate any competition that may force them to keep prices low. Either by buying up competitors, undercutting them until they fail, or colluding to form a cartel and price fixing.

And we do nothing to regulate any of it. And anything that we do to regulate it, even if written in the books, clearly has no teeth.

I think we can have a capitalist economy but I think that it has to have a floor, and a ceiling, and walls.

The walls would be what we allow to be a market. What products or services do we want to let markets manage? What would we rather have administered by the state, as a public good? I would argue health care certainly should be a public good given to us by the government, paid for by our tax dollars. What about education? Some things should not be put in the hands of corporations. Because, naturally, they will be extracted of value and we will suffer for it. So capitalism needs walls.

As for a ceiling, even if you want to dismantle capitalism now, all the money that exists in the economy would remain.

And I’ve thought about this before. Capitalism cannot be forever sustainable because it is built on the concept that there will be more money available tomorrow than there is today. That just isn’t logical. There is a limit to the actual practical fiscal value of all of the resources on earth. We do live in a constrained, limited system. There is, after some point, no further value to extract. And at that point, any increase in money, and GDP growth, so to speak, has to be fake. It’s no longer real because it no longer is tied to anything that actually has value that you can hold in your hand.

And that is a problem.

So end the growth? Put a ceiling in place? Sure. Then the money that exists would simply be exchanged back and forth. That could work, theoretically.

But I think that we should still have capitalist competition and a risk-reward approach, it’s just that it has to have a ceiling.

We have to be very specific about what kind of risk we are willing to allow. And who is allowed to risk how much with whose money. And how much someone really deserves to be rewarded when a risk pays off. And how we should treat failure when a risk worth taking doesn’t pay off.

Because, financial crisis are often the result of massive risk taken by financial institutions with the money of the population in their hands. When the economy crashes, it’s consistently because banks speculate wildly with their patrons money and then lose it and cannot pay it back.

They get bailed out by governments and the people are left to suffer.

We need limits on who is allowed to take that risk. We need to agree if and when a risk is worth taking. We need to reward risk takers appropriately. But, we also need to make sure that taking a risk, if unsuccessful, doesn’t threaten poverty and destitution. Because then only those with money to spare will take risks.

Let’s use AI as our example again. An AI model to improve cancer screening is worth the risk, financially. That would be a net benefit to society. People should be encouraged to pursue that risk. If it pays off, they should be rewarded. But, they shouldn’t be allowed to corner a market and then massively inflate the price of their product to make unmitigated profit. They should get to profit, but with a ceiling in place. They should be able to charge to repay their investment and profit meaningfully, but no more. That product should remain affordable to the people.

People who take stupid risks with others money should not be bailed out. The people whose money was thrown away should be helped.

If banks weren’t bailed out but the people they cheated were, maybe we would stop having so many financial crises.

Anyway, the last piece is that, if we create a system in which capitalist pursuit of competition and profit, in recognition of personal risk, is regulated and only worth while risks are taken, then we should also ensure that taking such a risk will not ruin your life upon failure. We need to have a safe and comfortable floor. We should have robust systems to provide housing and services to the poor. To those who risk and lose. To those who try and fail. Destitution should not be in the cards in a system that claims to emphasize rewarding the bold.

Anyway, this one felt winding. I hope at least something felt coherent. I’m sure this isn’t the last time I write about my thoughts on capitalism.

Leave a comment. Let’s have a conversation.