Saturday, February 21, 2009


A few more musings to add to the long post below. (Cause it clearly wasn't long enough!)

Money, of course, is an abstraction. (Gold standard nutters can be quiet in advance, thanks.) Credit is an abstraction of something that was already abstract. Securities and derivatives and all that goobledygook, then, resemble abstraction cubed, or something. The CDO/CDS market was like a couple of parallel funhouse mirrors: distorted and warped, but superficially infinite. As soon as a strong breeze came along, the house of cards collapsed under its own weight, since it was not founded on concrete stuff that actually existed in the real world, or on the work of human hands.

It's sickening, of course, to think that some really abstract, esoteric problem could cause very real, very widespread suffering of such magnitude. Personally, after the events of the last eight years, but especially the last six months, I will never look at the finanical trades (and the people that work in them) the same way again. I have become reinforced in my belief in capitalism, but the operative definition of capitalism has had layers of bullshit scraped away from it.

Labor and capital need each other very badly. When wealth is transferred from the poor to the wealthy, everyone becomes a supplier and nobody is a demander. I didn't take Econ 101, but I assume that means deflation. If you've got a small group of wealthy folks, a shrinking group of people that make stuff, and a vast underclass of workers with no work, you get pretty much where we are now. And since the middle class is increasingly mailing the keys to their house to the bank, it's obvious that wealthy folks are blind to the problems of getting everything you wish for. Just like predators can overhunt the food that sustains them, so can capital take so much from its employees that no one can afford to buy their stuff any longer.

The opposite problem (when labor dominates capital) is why genuinely communist countries never seem to be very stable. (FWIW the collapse of the Soviet Union was not due to this, it was due to many things, but I think chief among them was its unsustainably corrupt system of government rather than its economic structure per se.) So the recognition of labor and capital as yin and yang seems to me to be a crucial part of any economic philosophy.

So, to me, this post-2008 capitalism is going to have to be re-founded on the idea that markets are the best way to distribute wealth, up to a point, and the government has to be willing to step in and referee when needed. Proper, rational regulation is the only thing that separates functioning capitalism from anarchy. (Madison famously said, "if men were angels, no government would be necessary.")

Paramount to this is keeping nakedly corrupt assholes away from the government.

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