Saturday, April 21, 2007

Capitalism 3.0

Karl Marx thought he was a social scientist. Critics say Marxism was more of a religion than anything else. Marx argued that capitalism had internal contradictions that would inevitably lead to its own demise. The idea was that as the workers got poorer, which was inevitable by the nature of capitalism, the working class was more likely to unite against the owners of capital and their sheer numbers would overwhelm the ruling class and force a revolution. We now know that it doesn't at all work that way.

The Russian Revolution was about a small dedicated group of Bolsheviks who took dictitorial power when the old regime faltered and weakened. Lenin, Trotsky, and Stalin claimed workers' unity but the fact that so many working class people were sent to Siberia demonstrates that workers' unity was a myth.

The Chinese and the Russian communist systems were explicitly developed to wipe out capitalism but within less than a century they were both forced to embrace it. Capitalism is nothing if not resiliant. You could almost say that Marx was only half right. By consistantly outproducing its rivals, capitalism is bound to dominate and stay on top.

Indeed from the nineteen fifties to the present the material progress produced by capitalism has been astonishing. But alongside that progress has come tremendous costs to the environment and human health which has culminated in the global warming crisis. What the problem of global warming makes obvious is that capitalism without constraints leads to self-destruction. The problem is that we can't get rid of capitalism, so what do we do?

We can try and regulate capitalism but we have another problem which global warming has demonstrated: when faced with the facts about global warming the most powerful government in the world was influenced by corporations to suppress the science and minimize the extent of the problem to the public. This set back the cause of prevention at least ten years – at an incalculable cost to humanity and the Earth's ecosystems. In short, global warming demonstrates not only market failure but also “government failure”.

It's not as if we haven't had forwarning of this. History is full of examples of empires like the Romans and the Babylonians, that grew because they were able to extract resources efficiently but destroyed themselves because the were not able to extract resources sustainably. And in almost every case no-one saw it coming.

This time it's different because we can see it coming and we can prevent it. We know that we need to be able to reform capitalism if we are to survive, but how to go about it? Both our economies and our ecosystems need to stay healthy. We know trying to destroy capitalism doesn't work. We know tinkering with reforming capitalism doesn't work because we've spent the last century doing that and things have only gotten worse.

Suppose we use the analogy of a computer operating system. Capitalism needs an upgrade. Just as Microsoft upgrades from Windows 95 to Windows XP, we need to upgrade the “economic software” to keep the system from crashing. That's what Peter Barnes discusses in his intriguing book, Capitalism 3.0, published, 2006 and also available on the internet. Basically the solution is to change the rules so that the “commons sector” becomes an economic power to balance the power of corporations and governments.
A lot of people seem to dismiss critiques of capitalism, in spite of the signs that we are headed for disaster, because of what they see as the only alternative. Either there is private ownership or collective ownership and the latter is communism, which is far worse. Witness the history of the Soviet Union and Red China.
According to John Locke, the seventeenth century philosopher, who more than anyone else, influenced our ideas about the concept of “property”, private property is a good thing because it encourages people to work hard to improve it and gain a stream of income from it. But he did offer the proviso that the right to property ought to be limited to “...where there is enough and as good left in common.” Even Locke, the father of property rights theory realized that we can't survive if there is nothing left in common.
What is the commons? It is basically what is given to us by nature and culture. We don't do anything to earn it, we only have to exist in order to benefit from it. I'm talking about the things that we all share: air, water, natural eco-systems, language, legal systems, and scientific knowledge, etc.
The commons sector, which, as you can imagine, is much harder to quantify than private wealth, is estimated to be far more valuable than all the combined private and public assets in the world. Just imagine for a moment what we would do without it - without human culture and without air and water and trees.
Property rights are what define the operating system of our economy. In early capitalism natural resources were abundant but capital was scarce, so capital was elevated above everything else. We now live in a world “awash with capital” but scarce in natural resources. But the rules haven't changed. As Peter Barnes puts it in Capitalism 3.0, “The right of corporations to profits dominates all other rights. The rights of workers, communities, nature, and future generations are all trumped by capital's right to maximize profit.”
The nineteenth century conservative thinker Edmund Burke once said that society is a contract between past, present, and future generations. We have an obligation towards future generations. The trouble is that neither our present economic system nor our political system recognizes this obligation. Corporations are machines programmed to maximize profits. They have little incentive to preserve natural resources because they treat the cost of nature as zero and because preservation benefits future generations more than it does present stockholders. Future generations have no money and they don't vote, so they are not represented by democratic governments who are influenced mainly by voting blocks and corporate donations. The basic problem is that future generations don't have property rights.
The solution as Peter Barnes sees it is to create property rights for future generations by creating “trusts”. He calls this “propertization” rather than “privitization” which creates ownership by excluding others. It would involve the power of common property trusts to charge polluters rent for polluting the commons and to pay a portion of this rent to every citizen in the form of yearly dividends and an equal portion to support public goods such as education and eco-system restoration.
If this sounds pie-in -the -sky, think again. There are existing trusts that already perform many of these functions. There are nature conservation trusts that preserve woodlands and wetlands. The Alaska Permanent Fund reinvests royalties from oil and gas extraction and pays a yearly dividend to every citizen of Alaska. Old Age Security collects money from all income earners and redistributes it to all Canadians over 65. Medicare pays for medical coverage for every citizen.
In contrast, privitization, such as with private medical insurance, excludes those in greatest need, i.e., the poor and the chronically ill. Marx was correct, that capitalism leads to increasing inequality. In spite of tremendous economic growth since the 1950's inequality has increased. In the United States 5% of the population owns 95% of the wealth. Changing the economic operating system by giving future generations property rights through a system of trusts could both protect the environment by raising the price of pollution, and reduce inequality by redistributing money from polluters to non-polluters. The trusts would, like contemporary trusts, run themselves, and be publically accountable, unlike corporations and governments. They would form another sector of the economy and help to level the playing field for the rest of us.

No comments:

Post a Comment