👍👍👍 People constantly make it out like capitalism is an evil monster when it’s literally the thing responsible for improving everyone’s lives all over the world.
A sensible, well written, and enlightening primer about the way economic systems work that offers the view that capitalism is the most “organic” among them. I enjoyed reading this very much. As a little nit, I’d say the last few paragraphs restate what was already said so elegantly. I’d be curious to hear what Mr Baker thinks of the “socialized” capitalist societies in Scandinavia. I’ve always had the opinion, based on zero research, that they’ve achieved the best possible social/political system so far. Thanks for the great post!
Thanks for the comment, Ruben. I'm no expert on Scandinavia, but it is my understanding that they have turned back towards a market economy in recent years, and are better off for it. But the other factor here is that comparing a tiny country like Norway or Sweden to a larger country like the US, for instance, is misleading because it ignores the elements of cultural and geographic differences that can make huge difference in outcomes. Norway, in particular, is swimming in oil money and can afford rich social programs. But if you roll Greece into the equation, the picture looks different.
Differences in culture and resources play a huge role in the relative success of market economies, which is another reason why equity is such an unreachable goal.
Yes I agree that capitalism arose naturally, and socialism and communism were intentional attempts to correct inequities with it. Those attempts didn’t wind up being any better, but regulating capitalism was. It produced a much bigger middle class and greatly reduced poverty (which I did mention in my piece.)
I think we are still trying to understand the right amount of regulation that will make capitalism work best for humanity. And you perhaps took issue with my use of the word “fix” as a way of describing how we can make it better, as well as the fact that it is the middle class attempting to understand how to do that, but I certainly don’t understand how that makes it a “dangerous” goal to pursue.
Why shouldn’t we figure out how to make capitalism work better for humanity?
Thanks for the comment, Elle. I don't know that it is a dangerous goal, so long as we have a reasonable definition of what "better" means, and place reasonable limits on what we are willing to do to achieve it. If better mean more equitable, then how much more?
Some degree of redistribution for the sake of reduced poverty is something virtually everyone agrees on, because the rich don't want to have to live in fortified compounds for fear of the poor. But we have had lots of experiments around how much redistribution we can do before it creates more problems than it solves. We already have several cases of redistribution going too far and having more negative effects than positive ones. The issue is complex, and we don't understand it yet. Be we have quite enough evidence to tell us that there are limits to redistribution. The gains to be made may not be in more redistribution but in more finely tuned implementation of the levels of redistribution we already have.
(Redistribution, of course, is not an alternative to capitalism, it is how you mitigate the fact that some people are so much better at capitalism than others.)
So yes, that fine tuning is worth talking about, though I think it is the people on the ground, not the theorists who are going to come up with the right fine tuning. I certainly don't think I have the practical day to day experience to suggest which way we should turn which dial.
But I am wary of big ideas. Every big idea seems to have in it either some expectation of changed human nature or some suppression of right to force it to change. Life is too complex and people are too venal for big simple ideas. This is where I worry about a think tank of utopian thinker and dreamers trying to come up with the next big idea. I don't doubt their intentions. But yes, I think there is danger in what they do, if they ever try to implement those ideas.
I'd like to see us think less about fixing and more about careful and modest tinkering.
I think I am using “fixing” the way you are using “careful and modest tinkering,” because that is exactly what I mean. I think big ideas/visions help (hence the utopian novel), but I also think gradual experimentation and fine tuning is how we’ll actually make things better (hence the essays.) And by better, right now I mean that we alleviate poverty/expand the middle class to the entire world (not just the developed countries). And I do think there are ways we can tweak capitalism to be more equitable (maybe not all the way equitable, for all the reasons you mention, but at least better distributed and scaled). But I’ll be curious to see what you think about that as we dig into it.
Indeed, without examples it is hard to know what we mean when we use words like "fix" and "tinker." It will be interesting to see what you come up with as proposals for tinkering.
Personally, I look at this with the eyes of an historian. I'm not advocating for anything, I'm just trying to figure it out. I do think that the answer to extending the benefits of capitalism to all the world comes down mostly to eliminating corruption as corruption seems to correlate negatively to prosperity across the board. But eliminating corruption is something that countries need to do for themselves. History does not give us reasons to think that outside interference does anything to help.
I also think that the issue of who shall set the regulations is the real key and the real limit here, not what the regulations should be. The world is full of perverse regulations, such as the welfare payments to single mothers that have the effect of breaking up families, which we can't get rid of for political reasons. It is not the what nearly so much as the how that determines what decisions get made.
I have had a love-hate relationship with capitalism, as much as you can have affection (or not) for a natural phenomenon. I am a businessman, but I have also spent much time with the truly poor (as poor as anyone in America can get.)
On one philosophical hand, having spent much time in the crypto world, I've seen every form of libertarianism under the sun, not without at least a little agreement on my part. On the other, I've also seen that many of these clever theories fail spectacularly, either because the automated cryptoeconomic system is not beyond the control of its human beneficiaries, or because it *is* beyond the control of its human beneficiaries. Alas, neither we nor the works of our hands are perfect.
I fear the whole realm of economic theories reeks of a reduction to simplistic first principles, when the world is too complicated to be even figured out *within* one of said theories. If we can all agree on what money actually is (crypto or not) then maybe we could figure out the rest of it. I'm not holding my breath.
In regards to my own fiction, the titular City of the City and the Dungeon is perhaps capitalism in one of my more idyllic visions, where no one really minds what anyone else does as long as peace is maintained, and nearly every Dungeon-going party is its own business. The titular World of Wishes from The World of Wishes is a world without any law, the only regulation being what AI-powered contracts the Djinn-Human Interface Commission permits. It is my own nightmare of a capitalistic society without restraint, ultimately leading to the mass enslavement of most of its population. (After all, if you are your own property, there is nothing stopping you from selling said property to someone else.)
Both, in the end, are true depictions of my feelings on capitalism. I think, perhaps, it is better to be conflicted about an issue than to charge in with The Truth® to smite the Wrong People.
I think it might be getting close to the truth to say that our virtues are too tightly bound to our vices to ever reach a satisfactory balance. In capitalism, the virtue of enterprise is tightly bound to the vice of greed. The reductionism of right-wing economic theory looks at enterprise and ignores greed. The reductionism of left-wing economic theory looks at greed and ignores enterprise. But the only thing that can actually break the bond between enterprise and greed is charity.
This is one of the most sensible things I’ve read in a long time. Well done, and totally without personal attacks, which I found really admirable.
👍👍👍 People constantly make it out like capitalism is an evil monster when it’s literally the thing responsible for improving everyone’s lives all over the world.
A sensible, well written, and enlightening primer about the way economic systems work that offers the view that capitalism is the most “organic” among them. I enjoyed reading this very much. As a little nit, I’d say the last few paragraphs restate what was already said so elegantly. I’d be curious to hear what Mr Baker thinks of the “socialized” capitalist societies in Scandinavia. I’ve always had the opinion, based on zero research, that they’ve achieved the best possible social/political system so far. Thanks for the great post!
Thanks for the comment, Ruben. I'm no expert on Scandinavia, but it is my understanding that they have turned back towards a market economy in recent years, and are better off for it. But the other factor here is that comparing a tiny country like Norway or Sweden to a larger country like the US, for instance, is misleading because it ignores the elements of cultural and geographic differences that can make huge difference in outcomes. Norway, in particular, is swimming in oil money and can afford rich social programs. But if you roll Greece into the equation, the picture looks different.
Differences in culture and resources play a huge role in the relative success of market economies, which is another reason why equity is such an unreachable goal.
Yes I agree that capitalism arose naturally, and socialism and communism were intentional attempts to correct inequities with it. Those attempts didn’t wind up being any better, but regulating capitalism was. It produced a much bigger middle class and greatly reduced poverty (which I did mention in my piece.)
I think we are still trying to understand the right amount of regulation that will make capitalism work best for humanity. And you perhaps took issue with my use of the word “fix” as a way of describing how we can make it better, as well as the fact that it is the middle class attempting to understand how to do that, but I certainly don’t understand how that makes it a “dangerous” goal to pursue.
Why shouldn’t we figure out how to make capitalism work better for humanity?
Thanks for the comment, Elle. I don't know that it is a dangerous goal, so long as we have a reasonable definition of what "better" means, and place reasonable limits on what we are willing to do to achieve it. If better mean more equitable, then how much more?
Some degree of redistribution for the sake of reduced poverty is something virtually everyone agrees on, because the rich don't want to have to live in fortified compounds for fear of the poor. But we have had lots of experiments around how much redistribution we can do before it creates more problems than it solves. We already have several cases of redistribution going too far and having more negative effects than positive ones. The issue is complex, and we don't understand it yet. Be we have quite enough evidence to tell us that there are limits to redistribution. The gains to be made may not be in more redistribution but in more finely tuned implementation of the levels of redistribution we already have.
(Redistribution, of course, is not an alternative to capitalism, it is how you mitigate the fact that some people are so much better at capitalism than others.)
So yes, that fine tuning is worth talking about, though I think it is the people on the ground, not the theorists who are going to come up with the right fine tuning. I certainly don't think I have the practical day to day experience to suggest which way we should turn which dial.
But I am wary of big ideas. Every big idea seems to have in it either some expectation of changed human nature or some suppression of right to force it to change. Life is too complex and people are too venal for big simple ideas. This is where I worry about a think tank of utopian thinker and dreamers trying to come up with the next big idea. I don't doubt their intentions. But yes, I think there is danger in what they do, if they ever try to implement those ideas.
I'd like to see us think less about fixing and more about careful and modest tinkering.
I think I am using “fixing” the way you are using “careful and modest tinkering,” because that is exactly what I mean. I think big ideas/visions help (hence the utopian novel), but I also think gradual experimentation and fine tuning is how we’ll actually make things better (hence the essays.) And by better, right now I mean that we alleviate poverty/expand the middle class to the entire world (not just the developed countries). And I do think there are ways we can tweak capitalism to be more equitable (maybe not all the way equitable, for all the reasons you mention, but at least better distributed and scaled). But I’ll be curious to see what you think about that as we dig into it.
Indeed, without examples it is hard to know what we mean when we use words like "fix" and "tinker." It will be interesting to see what you come up with as proposals for tinkering.
Personally, I look at this with the eyes of an historian. I'm not advocating for anything, I'm just trying to figure it out. I do think that the answer to extending the benefits of capitalism to all the world comes down mostly to eliminating corruption as corruption seems to correlate negatively to prosperity across the board. But eliminating corruption is something that countries need to do for themselves. History does not give us reasons to think that outside interference does anything to help.
I also think that the issue of who shall set the regulations is the real key and the real limit here, not what the regulations should be. The world is full of perverse regulations, such as the welfare payments to single mothers that have the effect of breaking up families, which we can't get rid of for political reasons. It is not the what nearly so much as the how that determines what decisions get made.
This: There are no solutions.
https://www.youtube.com/watch?v=DvSHWaUDa7k
I have had a love-hate relationship with capitalism, as much as you can have affection (or not) for a natural phenomenon. I am a businessman, but I have also spent much time with the truly poor (as poor as anyone in America can get.)
On one philosophical hand, having spent much time in the crypto world, I've seen every form of libertarianism under the sun, not without at least a little agreement on my part. On the other, I've also seen that many of these clever theories fail spectacularly, either because the automated cryptoeconomic system is not beyond the control of its human beneficiaries, or because it *is* beyond the control of its human beneficiaries. Alas, neither we nor the works of our hands are perfect.
I fear the whole realm of economic theories reeks of a reduction to simplistic first principles, when the world is too complicated to be even figured out *within* one of said theories. If we can all agree on what money actually is (crypto or not) then maybe we could figure out the rest of it. I'm not holding my breath.
In regards to my own fiction, the titular City of the City and the Dungeon is perhaps capitalism in one of my more idyllic visions, where no one really minds what anyone else does as long as peace is maintained, and nearly every Dungeon-going party is its own business. The titular World of Wishes from The World of Wishes is a world without any law, the only regulation being what AI-powered contracts the Djinn-Human Interface Commission permits. It is my own nightmare of a capitalistic society without restraint, ultimately leading to the mass enslavement of most of its population. (After all, if you are your own property, there is nothing stopping you from selling said property to someone else.)
Both, in the end, are true depictions of my feelings on capitalism. I think, perhaps, it is better to be conflicted about an issue than to charge in with The Truth® to smite the Wrong People.
I think it might be getting close to the truth to say that our virtues are too tightly bound to our vices to ever reach a satisfactory balance. In capitalism, the virtue of enterprise is tightly bound to the vice of greed. The reductionism of right-wing economic theory looks at enterprise and ignores greed. The reductionism of left-wing economic theory looks at greed and ignores enterprise. But the only thing that can actually break the bond between enterprise and greed is charity.