Monday, December 17, 2012

The Divine Right of Capital

Prior to the development of capitalist economies, and the Industrial Revolution which provided them the opportunity to steal from the past (fossil fuels) and future (pollution, global warming, desertification, extinction) and thereby to grow in extent and population unlike anything before, command economies directed by social elites, kings, aristocrats, and the like, usually with slaves doing the hardest work, were the dominant form of economy going back to time immemorial.  Like all human social organizations, these command economies constructed a narrative which morally justified their existence.  The center of that narrative was usually the divinity of the King, either directly as a God or one having special ability to communicate with gods.

Capitalism turns that upside down, in a capitalist economy (in principle...but rarely in practice) we become ends, not means.  As ends, analyzed by most schools of economics, we are perfectly selfish ends, and many schools of modern economics have assumed that we have perfect forsight, live forever, etc, which leads to the derivation of the most horrible policies imaginable.

But goodness, just as we are becoming ends, we become means again.  We become workers and consumers, which are the means for endlessly growing capital at the behest of the capitalist masters.  Truly in Capitalism it is capital itself which becomes divine, and we only trade one aristocracy of masters for another.

Many point to the (so-called) liberalization of trade as having been a great loss for working Americans. One thing that trade liberalization does is create wage arbitrage.  Wages are driven down by the fact that there are always more poor and desperate people somewhere in the world.  This is not at all the famous (and far less useful than imagined) Ricardian advantage.  It doesn't have to do with Chinese workers, say, being more talented or capable than American workers.  In fact, the situation in China often requires more corporate investment to bring the Chinese up to American standards.  But they will accept less money for the same (or actually greater) amount of work.

But what has really driven the race to the bottom is not trade.  It is the freedom of Capital to go wherever it wants.  This is quite new, actually.  The classical economists assumed that capital was tied to a particular country (or empire) and was not free to move.  Why would sovereigns, such as Queen Victoria, want things to be otherwise?

Capital immobility was a key feature of the most successful world economy that has ever existed, the Bretton-Woods agreement.  One can trace the downfall of fair wages for workers in the USA pretty much to that moment, though later actions under Reagan and others made the situation far worse.

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