"At this festive season of the
year, Mr Scrooge, ... it is more than usually desirable that we should make
some slight provision for the Poor and destitute, who suffer greatly at the
present time. Many thousands are in want of common necessaries; hundreds of
thousands are in want of common comforts, sir."
"Are there no prisons?"
"Plenty of prisons..."
"And the Union workhouses." demanded Scrooge. "Are they still in
operation?"
"Both very busy, sir..."
"Those who are badly off must go there."
"Many can't go there; and many would rather die."
"If they would rather die,"
said Scrooge, "they had better do it, and decrease the surplus
population."
This chilling recommendation by Ebenezer Scrooge in Charles
Dickens A Christmas Carol is spoken of the “poor” in his encounter with
the gentlemen from the charitable society.
While it sounds like the ravings of a pure sociopath in the 21st
century, we miss the depth of commentary that would have attended audiences of
the cognoscenti of the late 18th and early 19th
century. Then, the proper noun “surplus
population” would have been known to mean those unemployed and under-employed who
serve no purpose to the rent-based labor model of capitalism. They were, in the minds of 18th
century economists, better off dead than being a drain on mercantile
profits. This is because they added
nothing in terms of marginal rents to be exploited for labor advantage and they
did were non-responsive to price manipulations.
They were not just the “unaccounted for” – they were useless. Ironically, the urban and rural poor of the
18th century were less valuable than slaves as they couldn’t even be
commodified into chattel trade!
Goldman Sachs Group Inc. issued a recent note calling into
question the efficacy of capitalism. “We
are always wary of guiding for mean reversion.
But, if we are wrong and high margins manage to endure for the next few
years (particularly when global demand growth is below trend), there are
broader questions to be asked about the efficacy of capitalism,” stated Goldman’s
Sumana Manohar and her colleagues. For
the new players not familiar with the statistical principle of “mean reversion”,
it’s most easily understood to refer to phenomenon that take on cyclical
oscillations where period of high prices, for example, ultimately re-equilibrate
with competition or increased supply thereby approaching commodity marginal
value. But in their analysis, Goldman
accidentally indicts the already failed modern capitalist
model by citing, as reasons for high profit margins, “strong commodity prices”
(read – exploitation of impoverished and disenfranchised labor and resource
regions where willful neglect of quality of life and land lead to extractive
bonanzas), “emerging market cost arbitrage” (read – exploitation of poorly
compensated labor), and other variables.
In short, the 18th century mandate that modern capitalism be
predicated on imperialistic land and inhabitant exploitation is actually
getting worse and incumbent
businesses are the ones who, through bribery, corruption, incumbency paralysis,
and patronage hold the only advantage to pressure “emerging market” countries’
leadership into allowing reckless endangerment of their land and citizens. Goldman would be ideally suited to know about
this given the extensive role they play in financing what Joseph Schumpeter
predicted as the end of capitalism.
Schumpeter recognized that, drunk on power, influence derived from the
control of capital and surplus profits, companies would take on corporatism where
their own existence would be more important than the markets they once
served. “Entrepreneurship” and “innovation”
in his forecast, would merely serve to create acquisition efficiencies for
corporations and would not challenge incumbent products or services.
Over the past several years, I’ve noticed an alarming trend
in what is heralded as “innovation” – once the fulcrum required to tip the
profit margin lever in the capitalist model.
In “Silicon” this and “Entrepreneurship” that, there’s been an
increasing push towards incremental improvements to incumbent platforms. We don’t come up with a new way to
communicate, we come up with an app that renders an incumbent device more
incumbent. We don’t come up with a new
enterprise model, we crowd-fund and crowd-source our way to market tests to
offer shrewd companies insights into where the market is susceptible to “new”. In homage to Frank Robinson, angel investors
and venture capitalists fawn all over “minimum viable product” efforts while
incumbency-threatening transformation is suffocated. For Adam Smith’s corrupt system to work,
it required capitalists who would take gambles on transformation where price or
supply dislocation was possible. During the last 15 years, this impulse has
been extinguished and corporatism has fully replaced capitalism in every
quarter.
And embedded in the virus that was unleashed when
mercantilism ceded its hold to capitalism was the toxin of necessary
neglect. By assiduously avoiding contact
with the land and people which were the “efficiencies” derived from colonial
and militant oppression and extraction, the general public could comfortably
clothe, feed and amuse themselves without ever seeing the cost of contaminated
water, inhumane treatment of workers, decimation of culture and community, and
extinction of resources, flora and fauna.
In other words, for the capitalist system to work, moral opacity was
necessary. Not surprisingly, the
observational retrospective piece by Goldman presumes that corporate profits
are essentially valuable. But this two
and a half century assumption has not been sufficiently examined.
Under capitalist dogma, profit is the arbitrage between the “cost”
of production and distribution and the “price” that a consumer is willing to
pay. It is the seduction premium that is
foisted upon a public willing to acquiesce to manipulated supply, frail egoic
identification, or perceived need. As
the consumer is seduced into their portion of the calculus, so too is the
enterprise willing to bankrupt its own sense of accountability or responsibility
by intermediating those attributes of business most odious. Celebrate the environmentally friendly
electric vehicle so long as you don’t pay any attention to the lithium miners’
plight. Carbon obsess your way into wind
turbines so long as you don’t see the rainforests of Papua New Guinea that are
clear cut for the toxic balsa timber.
Celebrate – with Goldman – the collapse of commodity prices while paying
no heed to the environmental and social cost of extractive industries becoming
more callous in their pursuit of metals and energy in more remote and
unverifiable locations. The less you
measure the extinction costs which are “free” in the capitalist model – that matter,
energy and effort that can be used and abused to extinguishment without any
model for replenishment or reuse – the more “profit” seems to manifest. Profit is the inverse economic function to
all-in-consequence value recognition. This
is NOT an anti-enterprise statement.
Genuine innovation, genuine quality, genuine purpose-filled products and
experiences can justify a PREMIUM which, unlike “profit” is
the value acknowledgement willingly bestowed on enterprises who manifest value
in line with socially desired outcomes.
And premium can exist on both sides of the antiquated business
model. As a supplier, I may offer goods
or services to partners at an advantaged price because I prefer my affiliation
with them. As the distributor of goods
and services, my transparency and honorable actions may engender greater reward
and recognition than my thoughtless, mercenary alternative.
And lest one misunderstand this commentary to solely apply
to business and industry, allow me to bridge the following important social
observation. Many deeply personal and
intimate relationships suffer from the same negligent accountability capitalist
curse. Profit in friendship,
relationship, and intimacy can be often a seductive trap where one party seeks
to benefit at the expense of the unacknowledged well-being of another. The resulting imbalance can, like
imperialistic business, lead to subtle and overt exploitation, resentment and
ultimate extinction of relationships. Unseen
and unaccounted contributions by one party can render gifts of generosity,
kindness and service which in their offering are freely and joyfully given and
manipulate them into entitlement and expectation. What once was generative and offered in love
becomes resented and provided in dutiful drudgery.
Unlike Goldman Sachs’ recent note, I would argue that the
capitalist ideal likely never got a chance to breathe. The experiment largely born in the industrial
age in the U.S., the U.K. and Germany was immediately co-opted by militarism
and state-sanctioned privatization of Federal Treasuries (not surprisingly
necessitated in each instance by sovereign debt resulting from expeditionary
military exercises). Apologists for
capitalism fail to evidence its capacity to function without tyrannical
extraction from colonial theft of lands and peoples thought to be too remote to
matter. Since the early 1800s, they’ve assiduously
avoided accounting for extinction and waste of materials, community, culture,
and energy. And they’ve entirely
neglected the damning evidence that the vast majority of genuine,
transformational innovation has been stifled or extinguished by incumbencies
that control capital, means of production and distribution, and governmental
patronage. In other words, irrational
profit margins are not the harbinger of capitalism’s failure – they’re merely
the forensic evidence of rigor mortis in the unborn fetus of imperial hegemonic
delusions.
When we account for it “all”, we’ll be able to discuss the
persistent, generative, infinitely orthogonal cyclical efficiency of systems
which are devoid of extinction, oppression and callous neglect for each actor
in the ecosystem. We will celebrate with
premiums those actors and enterprises that model the most salutatory of ethical
values rather than reward with indifference those who maximize seduction while
preserving moral opacity and negligence.
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