What is Wrong with Capitalism? (again)

Not a subject you can over do. As the dominant economic model of the last 300 years in the West and one being spread around the world, problems with Capitalism have quickly become problems for the world.

Definition
What is Capitalism? Problems begin even defining Capitalism. It is often associated with "free market" economics FME.  But what has "capital" got to do with FME. I can trade any time, any place, either swapping things with friends or using agreed currency. There is always FME. This is not Capitalism. For me Capitalism is the economic system which rewards Capital. It is the system where individuals seek to accumulate capital and to invest it so as to generate a return on investment ROI. Capitalism is then a continuation of the system of Aristocracy. In Aristocracy all land has tenants who pay 50% of productivity to the land owner. The Crown (who usually gained the land through conquest) then hands this land out in Dukedoms to those they want to favour and reward. The "landed gentry" thus have a steady income from the lands they own which is much sort after by the women in Jane Austen stories! Capitalism is the same, but instead of Aristocratic inheritance and The Crown lands are bought and sold in the free market. Since those days stocks and a variety of other investment options have been invented. But all with the same purpose: the rich with surplus money can get even more money.

Todo:
1) Video of software illustrating how Capitalism creates inequality.

A second video showing that without capitalism there is no increasing inequality. I should have added a group of people with 2x wealth so there were two wealth peaks, but since everyone earns the same amount there would be no change over time. Only with capitalism and returns on investment does that 2x wealth inequality grow.

Source code (c#)
https://github.com/riswey/SimplyCapitalism



2)  A criticism of "free market."

So the situation often arises where people have no "choice" in a market. For example supermarket till staff being told to work unpaid overtime of face being sacked. The most important one is people without food being paid in food for work done. And the food withheld of they do not comply. (This is actually the situation in the Capitalist world - in contrast to pre-Capitalist countries where people own traditional family lands). They have no choice. Another example is people buying life saving treatment. They must pay whatever they are charged else they will die. They have no choice. Much of Capitalism is based upon "prices" and "wages" that are not freely given. How then can we say that the "prices" accurately reflect anything. Adam Smith makes it clear his system ONLY works in a free market. Yet there is no such thing. The "invisible hand of the market" thus never operates correctly.

Making universal statements about people requires logical care!

While waiting for yet another delayed train yesterday (I've not had a train on time for weeks - what a kick in the teeth for Labour who were going to kick the cowboys out)... has this thought about Adam Smith:

So AS key theory is : "agents acting on self interest in a free market produce the optimum equilibrium between supply and demand" (I think there is considerable evidence that this is true).

But its only part of the story and that is the problem. Consider this. The theory can be written in logic for clarity:

Ax | x is an agent in a free market && x operates on self interest && supply and demand is optimum

In other words for every agent in a free market, working on self interest and there being optimum supply and demand is true. Right/Left can agree on this. (Note: in a non-free market like we have this is not true.)

If we assume that the "agents" we are talking about are also people things get interesting. People can make True/False evaluations and making True/False statements about yourself causes problems e.g. "This is false" (see Tarski)

So my new problem with Adam Smith is that when we make logical statements about people (x above) we are including elements that make True/False judgements (if humans can't who can? God?). So each x is ALSO a function which generates True/False.

So we can say: x("Ax | x is an agent in a free market && x operates on self interest && supply and demand is optimum") and now we are in trouble.

In plain English: on one hand Adam Smith makes a statement about people operating on self-interest, while on the other hand shows that people have the ability to understand universal laws that apply to everyone. If we ever do chose to operate on self-interest it is a choice made from the perspective of the universal: humans are neither limited to individual or universal: they can chose. Indeed the whole moral/political/social debate stems from the fact that humans can understand and make valid statements about the "whole", and if we are self-interested it is just a choice from that perspective.