Occupy Capitalism and the Elephant in the Room

Polity: A particular form of political system or government.

The Cold War has been said to have begun in 1945 with the first deployment of a nuclear bomb on Hiroshima, Japan, and the unraveling of the political relationship that had existed between the USA and the USSR during World War II. The Cold War was essentially an arms race between these two countries, which was eventually brought to a close with the tearing down of the Berlin Wall in 1990 and the subsequent breakup of the Soviet bloc countries. Having been born in 1946, I spent the first 45 years or so of my life, along with all the rest of the world, under the constant threat of a possible nuclear holocaust as the governments of these two nations jockeyed for position.

I was in high school when first introduced to the economic “isms.” The menu included communism, capitalism and socialism, which my classmates and I sorted out under the tutelage of our teachers. But, I must admit, I didn’t really give isms all that much thought beyond what was required in order for me not to have to repeat my history class.

I was an undergraduate student of business at the University of North Florida before the concept of capitalism would specifically reenter my realm of attention. In other words, up to that time I had completely taken for granted the blessings of the free economy that I had been enjoying for my entire life. Now I was learning how it actually worked.

And I learned not only how capitalism works, but I also learned why it works so well when properly implemented. In fact, it has worked well enough to make the USA, with a mere 311 million citizens, the wealthiest and most powerful country in the modern world. This, as compared to China, the world’s largest population with its 1.3 billion citizens, and India coming in a close second at 1.2 billion beating hearts, with per capita incomes of $7,600 and $3,100, respectively. The average per capita income in the USA is $39,900.

So, why does capitalism work so well? Because it is the natural economic state of humankind. Humans, as well as virtually all other animals, come into this life with intuitive reflexes that allow each to look out for himself or herself, and his or her brood. No one ever had to be trained to be a capitalist. One can visit the most backward, communities on the planet, and the parties will be engaging in capitalism without even the slightest encouragement. The minute the Libyan government fell and the bullets stopped flying, the Libyans were back engaging in capitalism. Setting up makeshift shops. Selling and bartering stuff. Capitalism in its most basic form works just fine without any government intervention.

So, let’s try a little thought experiment: Let’s say citizen A, upon whom I will bestow the fictional name of “Atlas,” lives in a tribal community in the jungles of Borneo. In Borneo, if you want to eat, you go fish. If citizen A has a good day and ends up with two fishes and determines that a little bread would go well with his fish, he trades one of the fishes for a loaf of bread from the baker who is sick and tired of eating bread all the time. Simple, simple, simple. And if he is clever enough to devise a seine and catch twenty fish at a time, he knows intuitively that his innovative genius and hard work will be naturally rewarded as he swaps even more fish for, say, a bottle of Pinot Grigio, a couple of creme brulees and a candle. With these goods in hand, he can then invite that little hottie with the ring in her nose–er, no, I’m sorry, that’s an American teenager–rather, that young lady with the four-inch loop inserted in her earlobe to dine with him and thus, perhaps, initiate some vino-enhanced hanky panky after dinner. Voila–capitalism.

On the other hand, socialism requires that any fishies that citizen A might catch with his net be shared with citizen B, upon whom I will hang the moniker “Otiose,” who hasn’t been smart enough, or hasn’t the gumption, to devise a means by which he could catch any fish for his own benefit. And, of course, as soon as A gives ten of his fishes to this less productive counterpart, said counterpart quickly learns that there is no longer any need to master the art of fishing at all, since he’s gonna get ten fish no matter what (and, fair enough, maybe he has a disability and cannot fish–special dispensation needs to be made in such a case. But, for our experiment, let’s assume he is just as strong and healthy as citizen A).

So, then what happens?

Well, next we find out that the citizen A, the guy with the net and new girlfriend (who tends to hang with him because he has demonstrated his ability to feed her on a regular basis and even entertain her with a little splash of Pinot from time-to-time), takes to hiding his extra fish in order to perpetuate this desirable new lifestyle he has earned. But, alas, once the chief of the tribe finds out about his surreptitious ways, he is allowed to keep his net but is forced to fork over his fish for the government to redistribute to others as they deem appropriate. So, guess what. Since he figures he’s not going to get to keep his fish, Atlas simply shrugs and stops fishing altogether. Then nobody has any frigging fish and the whole economy collapses.

A communist, on the other hand, is actually a socialist in panda bear clothing (sometimes). But it remains such person’s opinion that the individual tribepersons are not very good at determining who gets the fish and who gets the bread (although the guy with the net would disagree vehemently, particularly now that his girlfriend seems to have mysteriously disappeared); or, for that matter, how much fish or bread to produce in the first place. Thus, the communist government seizes the fisherman’s net and the baker’s oven and introduces them to central planning.

In this case, the chief and his hand-picked comrades take it upon themselves not only to dictate what products will be produced and who will produce them but also to dictate which tribepersons get what and how much. And if the chief were a religious fellow, he might even come up with some dicta that he can use as reinforcement for how he makes his decisions regarding the allocation of the fish, thus going so far as to claim righteousness in his work.

And, of course, all of this decision-making is really hard work. So, the chief and his minions, who are now in charge of the production and distribution of all these goodies, decide that they should warrant special portions for their trouble. So, it is deemed that the guy who caught the twenty fish must give nineteen fish to the central planners, who then give one fish to the baker and keep the other eighteen, and the chief starts dating that little gold digger with the funky earlobe.

Socialism, of course, means well. Its conceptual ideal is that all persons share equally in all the fish. Therefore, no one ever goes hungry or homeless–a charitable concept, indeed. But, as noted above, the entire exercise goes against the grain of the very nature of human interaction: If a person works hard and has the wits to figure out how to acquire twenty fish, then he is definitely going to be of the opinion that he should have the right to do with his fish as he sees fit. It doesn’t mean he won’t share them (with the disabled guy, perhaps), but the decision to do so will be made by him and him alone. Go get your owned damned fish.

But capitalism can have an ugly side as well. So, let’s see: What’s a great way to screw up this beautiful, natural economic system?

Let’s say that, instead of bartering for fish and bread, the tribal chief comes up with the concept of money. Without getting too complicated, let’s assume everybody agrees to treat this money as if it were a fish, so to speak–except it can be used to acquire just about anything, including a fish. This, of course, tends to substantially lubricate the entire system.

Next, we have to have a place to keep all this cash (those crafty capitalists are quickly going to come up with ways to separate you from your dough, of course). How about we invent a bank? Yeah, that’ll work. So everybody in the tribe puts their extra money (if they are lucky enough to have any extra money) in the bank for safekeeping and, in return for this service, the bank can loan that money out to others for a fee until the tribepersons decide they need it back for something. Good old-fashioned capitalism–so far. But, wait–after a while, we find that this capitalistic dynamo of an economy has produced tons of moolah!

Thus, the banks get bigger and bigger.

So, the tribal chief and his sycophants decide they need to regulate some of the activities of these guileful bankers, whom they notice seem to have a tendency to forget that all that money in their coffers does not belong to them. Most of it either belongs to the tribepersons/depositors who put their shekels in there for safekeeping, or, in the case of the profits from loans, to its tribepersons/shareholders who paid for the right to get a share of those profits by buying the bank’s stock. This entire exercise initially plays well with the tribepersons because it gives the appearance that someone is looking out for their interests.

But, gosh, as it turns out, it takes a lot of money for the chief to remain in charge. And guess who’s holding a lot of money? So, the chief and his lackeys regulate the bank a little, but not too much. And, in turn, some of the profits from the bank somehow manage to make their way into the hands of the chief and his lackeys—tsk, tsk.

And then, well, the banks get bigger and bigger yet.

And the chief and his toadies never lose their jobs.

Meanwhile, the rest of us are left to our own devices and hope like hell the bank doesn’t eventually just flick us off and keep our money or, just as bad, blow it all on something for their own benefit unbeknown to the rest of us (like derivatives or something, whatever those are). Or, for that matter, just plain lose it! (For those of you who keep up with such things, Jon Corzine, while CEO of MF Global, recently lost, as in “doesn’t know where it is,” $1.2 billion dollars of his depositors’ money–I wonder what that “MF” stands for.)

In addition to struggling to keep the bankers and tribal chiefs out of their pockets, those tribepersons participating in a free economy must also deal with the fact that, in its natural state, the amount of money and other stuff that members of the tribe may accumulate is going to be consistent with the a Gaussian distribution, or bell curve: That is, there will always be a small percentage of citizens who possess far more money that then rest of us for one reason or another, and a small percentage who will always have far less, for one reason or another, with about 90% of us somewhere in the middle. In fact, it is these “tails,” as they are called in the field of statistics, that so annoy the socialists, who would gladly impose an unnatural economic system on the tribe in order to get rid of them (the tails). Good luck with that (this is as likely to happen as is the global eradication of cockroaches).

And here’s my point (finally!–and yes, I hear your sigh of relief): I cringe when I hear those folks who initiated the so-called Occupy Wall Street movement call for the elimination of corporations and profits. (For the moment I will ignore the other 172 things it would seem that they would like to change.) They do this while sitting in nylon tents (manufactured by a corporation) and communicating with their iPhones and Macs, which, of course, they would not have were it not for corporations. And it is corporations that employ them (or, more likely their supportive parents, since most of these folks do not appear to be employed) in order for them to have the money to buy these products. And it was the people who work in these corporations that invented those devices in the first place and figured out how to manufacture them in such a way (economies of scale) that these protesters could actually afford to buy them. And then there are the energy corporations that have invested quadzillions of dollars in order to figure out how to harvest energy from wind and hydropower and the hydrocarbons and radioactive materials that are used to provide electricity to these folks so they can use their iPads to, well, bash corporations and energy companies.

And what about corporate profits? Much of those profits should come right back to the tribepersons through their 401k and pension plans in the form of increases in value of their investments and payments of dividends. Many speak disparagingly of those greedy folks who seek corporate profits, right up until they take a gander at their monthly 401k account statement (remember this: one cannot suck and blow at the same time).

Not to say there isn’t some room for improvement here. In fact, what goes wrong with these corporations (specifically, the publicly traded ones) is that, as with the banking problem, we have a small group of people who are in charge of all of the money (that would be the boards of directors and key officials of the companies) who make the claim that their work is a lot harder than anybody else’s, which is their justification for awarding themselves bigger and bigger pieces of the pie for their trouble (and, in the process, reducing the size of the piece of the pie that should be going to the stockholders).

So, as we can see, the best way to screw up this elegant natural economic system that has been serving humankind so well since we first walked the planet is to allow a handful of tribal chiefs and their cohorts, or corporate officials and their cohorts, or, God forbid, the two groups in unison, to be in charge of the money. Then, capitalism is broken. And, sorry to say, folks, the other isms won’t work under these conditions either. Forget about it.

The economic problems we are seeing these days are not due to capitalism. They are due to the manner in which capitalism has been implemented by our tribal chiefs and their cronies, particularly over the past ten years or so. And the elephant in the room that so many seem to ignore? Collusion. And don’t get me started on the public employee union chiefs and their cronies.