The State of the World: (1) The Fairy-Tale of Capitalism

ROTTERDAM – If anything motivated me to write this series, it’s annoyance. I do consider myself an optimist of sorts, even if the state of the world depresses me sometimes, -too often these days. The newspapers, and TV, the blogospheres and the tweets, the on-line articles and the reclusive rants, everyone seems to have completely left the reservation.

Political polarisation in (perceived) crisis is nothing new, but the anti-globalist movement is growing every day, in forms of isolationist, nationalist, anti-religious, anti-establishment and generally fuck-you waivers. And you know what, this isn’t going to be a self-righteous left-wing series of articles that set out to prove how I have the luxury to be right. Because I understand them, I really do. Many of the complaints of European right-wing populism, of the American alt-right, the dissatisfaction of the people who voted for the Brexit, I get it.

Something isn’t quite working right and a lot of people are getting screwed over or feel that way. In Western civilisation there is a discrepancy between what we were promised and what we’re getting. There has been a divergence between our expectations and reality, between how things ought to be working and how they’re currently, well, not working at all.

Economic insecurity is a main predictor for emergence of popular politics (also of dictatorships, by the way). For years everyone kept telling us things were okay, they were great, actually. The economy was booming and although some (blue collar) people got laid off when the factory moved overseas, the overall situation was definitely ‘improving’. In fact, the world has been doing that ever since, well, ever since we were hunters and gatherers. Wealth generation, however, has exploded in the last century and we’ve never been more well-fed and as fashionably clothed as we are now.

Then the Great Recession happened, and we got confronted with the fact that our global economy is completely out of control and nobody knows what the hell is going on. Now, every few months I read another hysterical article about how economic growth is ‘stagnating’ and unlike everyone else I do not understand the blind panic that this one little statistic tends to cause.

Maybe that’s because infinite economic growth is the fairy-tale of capitalism. Most statistics on growth compare one year to the last, and it better be higher. So we’re not only expecting our economies to grow, we’re expecting them to grow more than they did last year. And we get worried if they don’t.

The thing is, infinite economic growth does not exist. Let me double down on that. A large portion of our economic growth is fictional. It’s not actually related to growth at all. The financial markets, or our global Las Vegas casino-like gambling parlour, has got a bunch of people placing bets on other people placing bets on other people’s non-existent money. Nobel prize winning psychologist Daniel Kahneman wrote in his big book on human decision-making about research on the success rates of these people, of the stock brokers and financial experts. The hilariously terrifying conclusion was that these success rates are not at all correlated with knowledge, insight, or expertise.

The correlation between the success in year A and year B for the same ‘expert’ was almost zero. So some get lucky in year A and some get lucky in year B and overall, stock prices tend to go up, so there’s always more money earned that there was lost. In reality, the increase (or decrease) of a stock is not necessarily related to the actual worth of the company whose stock it is. If the stock increases in value .9% tomorrow, does that actually change anything outside of the stock market? Of course not.

Now, some of our economic growth is actually related to production. Outside of the financial markets there are lots of people making huge profits. There are roughly two ways in which you can do that: you can either add value  (and then increase the price) or decrease the cost. Apple’s very good at the first, but at least some of the added value of a 800 dollar iPhone is ideological and based on the brand (which you could describe as the magical quality of the phone). Specialisation, mass-production, and blood-curdling efficiency are usually the ways in which a corporation cut costs and increase profit.

After all, you must’ve wondered why the cheapest meat is so cheap if raising a cow takes so much energy and resources. It’s because the production chain for meat is as lean as possible (no pun intended), and the only way corporations are making profit is by up-scaling their production.

Generating new wealth is incredibly hard. It’s much easier to take wealth from someone else. In fact, externalising costs and playing a zero-sum game is what make capitalism so great. Why pay for costs if you don’t have to? In India you can just dump chemicals in the river without all those pesky environmental agencies breathing down your neck.

And your losses are usually someone else’s gain. Your job got outsourced? Your loss, their gain. Western civilisation utilises a disproportionate amount of resources on this planet and we need to realise that by doing so, other people can’t use ‘em.

Naturally not all human progress comes at the expense of someone else, but most of it does. In some societies we’ve accepted that as fair, with the implicit assumption that everyone is playing the same game. But we’re not, are we? You and me are playing an entirely different game than the Indians working in the call centres in Calcutta. We are not even playing the same sport as the inhabitants of the Nairobi slums.

Now why is that? Oh, we know why that is. It’s because I was born here and someone else was born in the slums of Nairobi. But I can’t take credit for the fact I was born in a country with a well-run bureaucracy. I participate in the system but I am sure as hell not personally responsible for its existence (or even its continuance). So why can we blame a Syrian for being born in a country marked by the complete absence of such a well-run bureaucracy?

It’s very easy to complain about Ugandan people if you’re white, highly educated, and you work for Shell. You’d think we’d need a miracle to fix those people.

There’s nothing wrong with earning good money. But you need to realise that some of those earnings came at the expense of someone else’s. Most of the profit we make comes at the expense of someone or something else. That’s what capitalism does, it motivates people to think in terms of a zero-sum game where if I win, it means you lose. Even when we’re not playing the same game. After all, in the production chain of our smart phones, the people who make the profit win, and the Congolese living around the privatised mine facility that excavates the minerals for the chips lose.

That’s what modernity has done for us, it has grouped our species in winners and losers, and the group of winners is getting smaller while the group of losers is growing every year. And that is why we’re running scared. We’re scared of the losers becoming winners and of us becoming losers.

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2 thoughts on “The State of the World: (1) The Fairy-Tale of Capitalism

  1. The economy is global. There’s no way around that. There is a two-tier system. The top tier is comprised of big corporations. This tier is governed by socialism. The state provides corporate welfare to the too big to fail corporations. The bottom tier is comprised of the consumers. This tier is governed by capitalism. You work to spend, you spend to get in debt, the cycle repeats. Those with the ability to consume more succeed more, like those of us in the west. Those who have a harder time consuming don’t fare as well, like those in the third world. Kinda sorta?

    Liked by 1 person

  2. Why would you say that this ‘top tier’ is governed by socialism and the ‘lower tier’ by capitalism? In many countries, consumers are somewhat protected by a welfare state (mostly in Western Europe) so that’d be democratic socialism or some iteration of that. Furthermore, corporate welfare is most definitely not socialism. Most corporate welfare is a trade-off between keeping your country ‘attractive’ for ‘investors’ or trading them in for higher tax rates. See my next post for more. 😉

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