Thought In Crisis

Responding to a series of articles in The Financial Times, Becker and Posner both offer their own views as to whether capitalism is "in crisis."

Becker, I feel, does not say anything substantial in his article. The general thrust of it is that no other system of economic organization offers as much potential growth as capitalism. True? Absolutely. But everyone already understands this. Furthermore it does not exactly address the crux of the issue. The crux of the issue is whether capitalism is a house of cards that will eventually drop the majority of us into the pits while an exclusive few gain rewards beyond anyone else's wildest dreams. (Cue spooky music and perhaps a "Mu-hu-ha-ha-haaaaaa!")

It is Posner whose insight strikes deep into the heart of the matter. He writes (emphases mine):
I think there may be a looming crisis of capitalism, though one that has nothing to do with banking, but rather with technological progress, and specifically with the effect of that progress on income inequality. Technological progress in recent decades has included not only the well-known advances in computerization, communications, and medical treatment, but also important advances in marketing, including political influence and manipulation, and management. The overall effects of these advances on many fronts have included a sharpening of competition, an increase in government debt to finance middle-class entitlements, particularly medical, a reduction in the demand for manual labor, and an increase in the financial returns to IQ and to higher education (which are correlated). These developments seem to be increasing the inequality of income and wealth and creating sharper class divisions than the nation had become accustomed to in the decades following the end of the 1930s depression.  
There is nothing in the economic logic of capitalism, any more than in the biological logic of evolution, that drives an economy toward income equality. The basic logic of both systems is competition, and competition produces losers as well as winners. A class of workers can become extinct, just as a species can. The difference is that the combined effect of envy and democratic politics can result in policies that distort competition in order to increase the welfare of the losers in the competitive struggle. Such policies tend to be inefficient and thus to retard the smooth operation of capitalism as an economic growth engine. Evidence for this proposition is found in the sluggish economic performance of many European nations.
True to the sterility of the language employed on the Becker-Posner blog, however, Posner has greatly understated the adverse impacts of socialistic policies by couching them in terms like "retard the smooth operation of capitalism as an economic growth engine."

Thought, Not Capitalism
Nonetheless, Posner has nailed the core issue: Capitalism isn't in crisis, but there is obviously a looming thought crisis leading us to a ledge. Posner suggests that the crisis is due to "technological change" which has lead to large income inequalities. But of course advanced technology and capitalistic success stories are certainly no crisis to speak of. They are a social boon.

Instead, the problem is almost wholly perceptional. Rags-to-riches stories were once the bread-and-butter of American mythology. Now more than ever, though, there is an overall sense that the rich only get rich through misdeeds; the rest remain poor the rest of their lives. One frequently encounters this sort of attitude in Eastern cultures, where the eons-long absence of capitalism and democracy have created a culture in which only the already-rich are permitted to succeed, while the rest must bribe and scheme in order to gain access to wealth and power. (See the movies Corporate or London Dreams, or more recently Agneepath for poignant examples.) But in egalitarian America, such perceptions are foreign to our way of thinking.

Or, they were. At some point during the 20th Century, the seeds of socialism took root in America. When I say that, I don't mean socialistic laws, which have almost always existed in America's history. Instead, I mean socialistic attitudes. The post-Industrial Revolution presidents have all employed the language of class warfare to promote their ideas. We as a society took the bait hook, line, and sinker.

As a result, we can no longer separate the concepts of wealth and class, as we once could. The "classical tradition" in America was once our guiding light. We understood capitalism culturally. We felt that hard work, ingenuity, and opportunity were sufficient for success. We now believe that one man's wealth comes at the expense of another's.

Self-Fulfilling Prophecy
Ironically, it is this perceptional shift - and not socialistic policies themselves - that paves the way for socialist policy and an anti-meritocratic society.

Once people accept the premise that politics are how things are achieved, not work, then all workplaces become political rather than meritocratic. The rules change completely. Rather than out-performing others in hopes of gaining a big promotion, people start to pursue face-time with the boss, closed-door meetings, special coffee outings, and so forth. It's not what you know, it's who you know.

My critics will tell me "it's always been this way," but in fact it really hasn't. In general, the politicians in the workplace were always viewed as such. We had words for them: schemers, shysters, sycophants, yes-men... The language has changed. We now say they "network." We laud them for their "social IQ" and their "soft skills."

And that's just the workplace. Even youth sports competitions have fallen victim to Whore Culture. Winning outright hurts feelings; when winning is no longer an option, people resort to politics. If the big prize is a big medal and you don't have the skill to win the big prize, your next best political option is to devalue the prize - give everyone a medal.

The Way From Here
Of course, there are a lot of issues mixed up in all of this. It's not clear to everyone where the line is between out-competing others and resorting to shady business practices. The reason it's not clear is because our perspectives have shifted to the point that people are no longer interested in identifying a difference. "They're all rich bastards, as far as we're concerned." So spread the wealth around because the winners can afford it.

We're not just stifling our economic growth engine as Posner points out, we're obliterating the difference between honest competition and dishonest competition, and filling up the resulting void with politics.

We are no longer interested in delineating. Consequentialism reigns supreme. The end more than justifies the means: the end is the means.

The only way out of this mess is get back to intellectual honesty, get back to the point where we know the difference between an honest businessman and a socially responsible businessman. (And trust me, there is a huge difference.)

We need to get back on track. We need to restore our ability to perceive nuance and discuss differences in concrete terms. We need our language back.