The Difference Between Building a Working Society and Bailing Out the Capitalists
It’s a strange and circular question, I know. And yet, the latest proposal by the American left is the curious and strange idea of a “capitalism for the people.” A fund of some kind will invest in American titans of industry, Apple, Amazon, and so forth, the fund will be owned by the state, and it will issue a dividend to people, as its holdings increase in value. Presto! It’s a way to make the romantic American Dream come true. Now everyone’s a capitalist. Hooray! We’ve saved capitalism at last! But have we saved people, democracy, or freedom? Let’s think about whether such a thing as a “capitalism for the people” can really exist — or whether, like so many other American ideas, it’s a kind of retrograde, weird, folly.
Though proposals like this are sometimes called, in the weird argot of American politics “democratic socialism”, it’s truer to say that they’re “democratic capitalism” — ways to democratize capitalism, and therefore, to rescue it. The hidden assumption is that capitalism is not really the problem — the question is who owns what. If we decentralize ownership, we have democratized capitalism, and thus, we have solved our problems, because if everyone’s a capitalist, then the wealth will be shared.
Is any of that really true? Or does it just make the problems of capitalism worse, because now there’s more capitalism? Or should Americans be thinking in simpler, less strange, less convoluted ways? Is this just overcomplicated financial engineering as a last-ditch attempt to save capitalism — an ideology Americans are attached to every bit as desperately as Soviets once were to theirs? Should we build something else entirely, instead of a complex Rube Goldberg machine with which to bail out capitalism? The question really is this: are idea of this sort really just ways to bail out capitalism — at everyone and everything else’s expense?
To answer those questions, let’s think about how all this would work. The first question is obvious. Who’d pay for the capital of such a fund — how would it have the money to buy shares and bonds and derivatives and so on? One answer (LOL) is voluntary contributions. LOL, because Americans are broke — 80% live paycheck to paycheck, 70% can’t raise $1000 for an emergency. Good luck with asking them to donate to a bailout-capitalism fund.
What about taxes? That’s the second idea that’s floated. But if we are to tax corporations and the wealthy and so on — why would we use the money to…buy shares in the very corporations that the wealthy own? We are giving the money right back to them. Does that make any sense to you? So the immediate effect of such a fund would be that inequality would increase, not decrease. What would the wealthy use their money to do? Probably to go on corroding democracy, for a start, but I digress. It’s enough to say that we’ve used taxes not for any real redistributive purpose at all.
Still, let’s assume that we’ve raised the money, and set up the fund. What does it invest in? Bonds don’t yield very much. Derivatives blow up. That leaves us with stocks. And one truth of the stock market is that the lion’s share of returns always come from a handful of companies. In the 90s, Microsoft and GE, today, Apple and Amazon, and so on. It’s between 3 and 5, usually — those who’ve built the era’s most successful monopolies. In previous ages, it was railroads and newspapers and so on — always monopolies. So our fund would essentially be investing in monopolies. But what do those monopolies do? Well, they overcharge people to begin with. So all we are really accomplishing by investing in them, and giving people dividends, is to give back a little bit of what people have been overcharged for in the first place.
But why wouldn’t we just accomplish that directly? By passing laws for higher wages — or even bigger ideas, which I’ll come to shortly? Why go to all this trouble? To set up such a fund, and manage it, and so on, will require pretty significant amounts of money, time, and energy, simply for it to run. If what we want is simply to take money from monopolists and give it back to people, then we could simpply break up those monopolies. But if we use the approach of a fund, then those monopolies are strengthened and reinforced — they have more capital, not less. We are now instruments of the very machine that is exploiting us. How strange a place we end up in when we hope the answer to capitalism is more capitalism.
Yet now a stranger thing happens, too. What happens if the stock market crashes? Well, my dividend will decrease, and yours will too. So now we’re all hostages to the stock market — we must make sure it goes on rising. But what makes stock values rise? Profits do. Where do profits come from, in American capitalism today? From squeezing workers on the one hand, and then selling them the very goods they are involved in producing at eye-watering prices on the other hand, in their guise as “consumers.” So profits are maximized by minimizing costs — the most significant of which is wages, and raising prices. But all that is just a way to say — keeping my income stagnant. And so I’m dependent now on the stock market rising, if I want my dividend to grow — but the only way it can do that is if my income flatlines, and I pay higher prices for the same things (like insulin, college, textbooks, media, finance, whatever.) Do you see the bizarre and funny and quite ludicrous outcome? We haven’t accomplished anything at all. The dividend I get is just a portion of my very own exploitation increasing.
I’ll come back to that, because it’s the central reason we can’t really use capitalism to fight capitalism.
Now let us assume that even so, we do all the above. There I am, with my share in this fund, and my dividends, which give me back a few thousand dollars a year, which I am being overcharged for anyways. What would a smart capitalist do, seeing all this? Well, he would come along, and say something like: “would you like to sell me that share of yours?” But let’s say we make our share “nontransferable.” As if that has ever stopped capitalism from preying on people. The capitalist will simply come along and say: “You can’t sell me your share — so how about I make you a loan, and in return, you give me your dividends, over the next few years, and if you cannot repay your loan, then your dividends are mine in perpetuity.”
How many Americans would agree to such a thing? Well, many would probably not like to — but would be forced to, precisely because they can barely make ends meet to begin with. Maybe you suddenly fall ill — chemotherapy, or homelessness? Maybe you lose your job, and your kid needs to go to college. Along comes the capitalist — here’s a healthy sum of money, just give your share of the fund. Bang! There goes the dream of democratic capitalism, all over again.
Only this time, we have made the problem of predatory capitalism even worse. Because what does the capitalist own now? He owns shares in companies. But he also owns shares, if not formally, then at least de facto, in the fund that government owns that owns shares in the companies. He earns a double income now, and we have accomplished less than nothing at all. We used taxes, remember, to pay for the fund. But now those very taxes have been used to create new mechanisms for capitalists to increase their wealth. We redistributed wealth to people — and then capitalists redistributed right back to themselves. Inequality has probably not gone down very much, people are probably not a whole lot richer, and none of the old problems have gone away, in fact, they are worse. Monopolies have gotten stronger, capitalists have new ways to prey on people, and people do not have long-term ways to really prosper. What was the point of this game?
By now, through all these strange, convoluted, bizarre twists, I hope you see the principle. You cannot use capitalism to fight capitalism. The idea that people should fund capitalism more is absurd on its face — because capitalism will always be primarily interested in keeping proles proles, and capitalists capitalists.
The moment we try to use capitalism to fight capitalism, we will only accomplish one thing: people will be exploited more, not less, and in weirder and stranger ways. Remember my example of the stock market booming — at the expense of my wages? Either my dividend increases, or my wages do — now I am exploited either way. If my dividend increases as the stock market booms, my wages fall — and vice versa. Inequality, immobility, precarity — all of these things remain just where they were. We haven’t solved any real problem at all — all that we’ve really done is create new ways for capitalists to exploit people: we’ve bailed out the capitalists. What else was going to happen?
And that means three things will happen. Capitalism will buy back from the most vulnerable and poor the ownership they have been given, the instant that it is possible to. It’s monopolies and privileges and powers will be strengthened — we will have reinforced foolish and fatal ideas like corporate personhood and patent thickets and so on. And most importantly of all, by bailing out capitalism, we will never have invested at all in the things which capitalism doesn’t give us — healthcare, education, finance, retirement, childcare, and so on. Society will still be crippled by shortages of all these things — just as America is today, but the capitalists will only have grown richer, and so by using capitalism to fight capitalism, we will have only have made ourselves poorer.
So let’s start at the beginning. Instead of all this complicated skullduggery — which is basically a way to bail out capitalism, not people, let’s imagine we forgot entirely about bailing out capitalism.
Using those very same taxes, what would we do? We’d build great systems of universal public goods. Healthcare, education, transport, income, savings, retirement, elderly care, childcare, and more, for all. Administered by national agencies and services of some kind. Why would all this work far better than using capitalism to fight capitalism — which can only end with more capitalism?
We’d employ millions of people, at stable and rising incomes, in jobs which mattered, which bonded people together again, and gave them a sense of meaning, purpose and optimism. We’d employ at producing the things which are the least profitable — but count the most in raising people’s quality of life. That is why though Europe doesn’t have Amazon and Apple — any trillion dollar corporations at all — it has things which are far more genuinely valuable: longer, happier, richer, saner lives, stabler democracies, more trusting and gentle societies. That is because people are employed in the production of the very goods which benefit them most, but capitalism will never provide.
The things people would produced if we employed them this way — healthcare, finance, education, retirement, and so on — are the very things that capitalism takes away from us. Using capitalism to fight capitalism, we will never have more of these things — we will just be shared owners in diminishing quantities and qualities of them. I know — that sounds illogical — and that’s because it is: we will only be joint owners of our decline. Because as those diminishing quantities make us poorer — chemotherapy or my mortgage? — along will come the capitalist, prey on us, and take what little we have. But we will still not have the chemotherapy, if you see my point.
Bailing out capitalism is an idea so weird, strange, gruesome, and funny that only Americans could have come up with it. There is a much simpler way. It is called social democracy. It is already the world’s most succesful model of political economy by an astonishingly long way — in just fifty years or so, it has created, from ruins and rubble, history’s highest living standards ever, period, full stop.
Yet the strange thing is that American leftists don’t appear to be interested in learning from it. They are coming up with ideas like the above, which might sound glamorous and seductive — at least to Americans, because they are indoctrinated into capitalism. But the truth is they should be learning from what works spectacularly well. They should be asking things like: “Hmmm, should we have a healthcare system like Britain’s NHS, where healthcare is locally owned and nationally administered, like Switzerland’s model where people get vouchers, or like France’s version which subsidizes private and public care?” But they don’t. They think they need to reinvent the wheel. Why? Probably because just like many Americans, they suppose they are above history and the world. But arrogance dooms us to ignorance, my friends.
The world, alas, has never mistaken the American leftist for a revolutionary. America doesn’t need to bail out capitalism. What it really needs is not to. Capitalism is dying. And that is a healthy thing — if at least we can prevent it from melting down into fascism. Because there will never be a kind of political economy that lasts forever, nor should there be. Tribalism, feudalism, mercantilism, empire— all these came and went. Human history is about motion, change, progress, my friends. And the problem is that Americans are stuck, forever, at one stage of it, refusing bitterly to let it go. But that is why things feel so grim and desperate in America today, too. It refuses to embrace the future — and just goes on reinventing the dead past.