5. R&R-Capitalism (to come)

R&R-Capitalism by Andrew Guthrie-Dow

To understand capitalism, even a little bit, is difficult, but why? With time-and-effort I or anyone could read-up on jet-engine-maintenance, or brain-surgery-for-beginners, and get to the agreed-basics pretty-quickly. Somehow to me, capitalism doesn’t seem to fit into this category of understandability. Perhaps if we first try to comprehend why understanding it is difficult, so difficult in-fact it is continuing to be hotly debated even after hundreds of years, we might gain a little enlightenment on how we should “attack” the subject.

My background is IT, so this shapes my view of things. Through this IT lens, Capitalism rather like Evolution, seems to have characteristics of an algorithm. They both take inputs, process them, and spit-out results. For products raw materials are collected, processed, physical-objects manufactured and sold to customers for profit. For services, like the dirty-state the unwashed-floor of a hospital-ward can be upgraded to a clean-state by hiring cleaners. Or in the case of Evolution, a niche-area like a riverbank end up being populated by organisms that can exploit it. 

But unlike computer or mathematical algorithms no human has sat-down and designed it, tested it and optimized it. In fact, it is very difficult or even meaningless to assign a purpose of these “undesigned” algorithms. Does Capitalism exist to ease the creation and distribution of wealth, or Evolution to ensure the continuation of a species (think parasites that go extinct when their host species vanishes)? But his does not mean that we humans can’t understand it at least to a degree where we can influence things to our benefit, whether this be a rich, happy and inclusive economy or the development of new and better breeds (by “unnatural” selection). So let’s see how this might be done.

There are a few tools that are used to understand things. You can just describe the thing under discussion, and that’s a good start. Historians do that, newspapers do that, often philosophers do that. The temptation is to go further, can you analyse the thing – break it down into smaller parts and understand those individually, then comprehend it in its entirety by working-out how the parts work collectively-and-collaboratively. 

This approach lends itself to modelling; either mathematical models and/or computer models and/or physical models (think the Moniac fluid machine of Bill-Phillips). These models can then be stress-tested to see if they behave in an identical way to the thing itself. Even if they do it doesn’t mean you’ve understood the thing, it might be operating in a different but parallel manner (think electromagnetism with Kelvin’s vortices versus Maxwell’s field theory). 

A fascinating topic in modelling is “grain-size” (I’m a geek, I’m allowed to be fascinated by grain-size). In the IT modelling of supply-chains I was involved with the generally-agreed-direction was to model smaller-and-smaller things, and thus approach reality. Markets could be broken-down into channels, and sometimes channels into individual entities, such as companies or groupings. The ultimate here is the individual consumer, company, store, factory etc, etc. This is becoming increasingly possible. 

Why not have a super-computer modelling the entire world’s populations, bank-accounts, salaries, down to and including what’s in people’s fridges at any moment? For all I know, subsets of this world-wide model are very possibly already in place, sitting in the data-centres of the world’s security-centres, there to alert them to terror-related activities and operations of foreign agencies. 

If economists ask politely, this treasure-trove of information could be used to do economic what-ifs on a mega-scale. What happens if we reduce the price of a Big-Mac by fifty-percent, or we create a salmonella scare in Switzerland. We would finally have the tool to do this modelling with a realistic-inputs; not aggregates or guesses, but real individual data. This data could be anonymised to avoid misuse, but I think we could all agree that anyone who buys grains for instant-mashed-potato should be identified and forced to visit with their local shrink. 

This world-wide, real-time, detailed-model is actually a simulation of (economic) reality. You could safely explore questions such as whether we should go back to the nineteenth-century and replace income-tax with import-tariffs. The unexpected consequences of doing this could also be probed. One might be on smuggling, that age-old activity that in recent years has almost fallen into disuse, except for the notable exception of illegal drugs. 

Whole communities used to survive off smuggling in previous centuries, from intentionally ship-wrecking cargoes to supporting huge gangs of customs-officers. It’s been suggested that up to ten-percent of the economy in the middle-ages was centred around smuggling – happy days, and ones we might soon be recreating with guidance from the US.

Unexpected consequences are not always bad. With smuggling on the rise, all those sea-side communities blighted by unemployment and low educational attainment could see a resurgence in their fortunes. The great thing about smuggling and the black-market in general is that it offers opportunities for all. There are no formal education requirements such as degrees or high-school-diplomas; instead, raw natural-talent is the driver. However I am a great believer in education to augment natural-talent, so I would suggest new courses and curriculums are created to cater for the new trading conditions – “navigation-for-smugglers”, “resisting-interrogation-techniques”, or the “basics-of-money-laundering” should-and-must be taught at school.

Another way is to experiment. I like this approach as it doesn’t rely on any genius insights - just keep kicking the thing until it is forced to give-up and shows you what it’s doing and how it’s built (sorry for the technical explanation here). Let’s also experiment big-time – not with a few economics-undergraduates given a few dollars to buy different coloured sweets/candies to provide insights, but the whole economy of a sovereign-country. 

I propose a world body of some sort guarantees the bold initiative of such a sovereign-country in trialling, for instance, MMT (modern monetary theory). In the vanishingly-small probability that the project goes terribly-wrong, with the price of wheel-barrows to transport the cash generated soaring, the world body could step in and rescue the country concerned. Unfortunately, of course, by the time the bale-out occurs priorities may have changed, and the volunteer-country is left stranded with hyper-inflation, mass-unemployment, civil-disorder, and a fast-rising fascist movement. No matter - at least we will have got the answer to whether the new-idea-on-the-block is game-changing, or just a load of old-bollocks as its detractors always said it was.

Well, you would think so at least, but it seems economics more than in any other discipline, is the domain of the “true-believer”. To this strange entity no outcome or fact can’t be used to prove the opposite of the bleeding-obvious. The policy didn’t work, then either I need to tweak the model a bit more, or the policy wasn’t implemented correctly or fully, or dark-forces conspired to thwart the desired outcome. 

Which is why that if a newly formed sovereign-country, perhaps a future Scotland, should carefully examine others previous successes and failures before doing anything “bold”. Perhaps playing the existing flavour of the capitalist “game” better than your competitors is no bad thing to do to begin with. Then after some initial success you can safely decide to back your currency with giant cowrie-shells, declare a universal two-day week, write-off all foreign debts, and set-up a trading-hub in the Darien-gap. 

That’s enough macro-economics; let’s “do” micro-economics, starting with my favourite phenomena, bubbles, pyramid-schemes, Ponzi-schemes and scams. There’s almost a hierarchy in these three activities, from legal-but-insane, through semi-legal-but-dishonest, onto illegal-and-dishonest, finishing with the absolutely-criminal, each taking advantage of a capitalist-framework, vulnerable-people and careless-organizations. Bubbles first; they’re really fun.