So if this isn’t capitalism, what is it?
Lately I’ve been pointing out that what we have in America today is not capitalism but, rather, neo-feudalism, with corporate owners in the place of the lords of the manor of old and the majority of Americans as serfs dependent upon their overlords for their every need.
There are trappings of capitalism, sure. There are still markets, there are still a few small businesses bravely struggling along as chain stores and big box stores take over everything thanks to regulatory capture and monopolization of capital markets, there are still a few people who manage to create new and innovative businesses that make it. But by and large, this is feudalism, not capitalism.
Capitalism, fundamentally, is not markets. Markets can exist in the absence of capitalism, indeed, even in the absence of money, though money tends to be invented relatively rapidly because barter is such an inefficient way of handling trade. Rather, capitalism is, fundamentally, a method of time travel.
Wait wait, I hear you say. Time travel? Yes. Time travel.
In pre-capitalist economies, businesses adapt to consumer needs very slowly. If Acme Widgets is selling Wurtzingers and the tastes of the general public changes towards demanding Furblacknitzes, Acme Widgets in a pre-capitalist economy must slowly accumulate the income to buy the equipment and hire the people necessary to produce Furblacknitzes. So pre-capitalist economies respond very slowly to changes in consumer tastes or desires.
But in a capitalist economy, the money supply of the entire nation resides in banks as deposits (i.e., as loans to banks that banks then pool and loan out to businesses and individuals), and Acme Widgets gets a loan from the bank then pays that loan back at some future timeusing the money earned from selling Furblacknitzes. In short, Acme Widgets has TIME TRAVELED — they slowly accumulated the money needed to tool up for Furblacknitzes *today* to satisfy the demand for Furblacknitzes *today*, but they did this in the futureand the money traveled back in time to when they needed it!
Note that this requires a functioning financial system — banks that provide loans to deserving businesses that need money for expansion, financial markets that sell bonds and partial ownership in businesses to similarly provide money for expansion, and so forth.
And that’s what we’re lacking today. Banks aren’t performing their job of risk aggregation — that is, pooling the excess income of the nation and splitting it between millions of borrowers so that any one borrower failing does not cause a loss of any one depositor’s entire funds. They lent out money to borrowers who they *knew* could not afford to repay the loans, and now aren’t loaning out money at all. And capital markets have turned into just a giant ponzi scheme where stockholders and bondholders compete to scam each other into buying each other’s overpriced stocks and bonds.
If you are a small business wanting to respond to changing consumer needs today, you literally can’t get money. Which is impossible in a capitalist economy, but we don’t have a capitalist economy, because a capitalist economy requires there to be access to capital — and unless you’re one of the Fortune 500, that just isn’t true in America today, at least not at any interest rate short of ursory.
This post originally appeared at Badtux the Snarky Penguin.