Flutterby™! : Capitalism = Natural Order? 2007-09-26 17:26:21.439221+00

Capitalism = Natural Order?

2007-09-26 17:26:21.439221+00 by ebradway 5 comments

Yesterday, I posted a link to one of Jorge Cham's comics and this lead to links to essays on governmental response to "disaster" in neo-liberalism. Reading reviews of The Shock Doctrine (especially the negative one) inspired me to pose a question du jour:

Is capitalism and free markets a more "natural order" for an economy?

In other words, does laissez-faire provide the economic equivalent of the hyothetical "in a vacuum, ignoring friction" environment in which simple mathematical models of physics actually function?

The phrase "natural order" seems fraught with cultural meaning. It's been used as a catch phrase for everything from the "noble savage" image of various primitive cultures to rallying cries for PETA to justifications for genocide. Personally, I think socialism as it was practiced in the Soviet Union is probably closer to a "natural order", lots of pack animal behavior, "survival of the fittest" in the most gruesome senses, mass starvation, that seems like what happens out there in the natural world. The herd's as fast as the slowest gazelle, every hyena for itself, dinner is what you can catch sort of natural order.

A "free market" as it's generally posed means a market free from the threat of violence, where interactions and transactions are voluntary. That, I think, gets much closer to the notion of "spherical cow of uniform density" model of economics. It's also the one in which, by definition, the least coersion occurs.

And, as such, although I think it's more practical, it's about as mythical as the "communism that works" that 18 year old stoners are regularly heard espousing.

#Comment Re: made: 2007-09-27 12:54:45.193611+00 by: jeff [edit history]

Here is an interesting perspective, relating to this topic and other recent threads at Flutterby.

I remember a discussion back at the Coffee Shop on McCallie, John, I forget his last name but he was a economics professor at UTC and now works for the World Bank, pointed out that there were cultures which collection of interest was forbidden for religious reasons, and that those cultures still developed economic mechanisms which functioned as loans with interest.

All economic transactions occur in a market, there are various frictions in those markets, government interventions are frictions and barriers, but they're just that, and if the demand is high enough alternative behaviors will occur. "The War On Drugs" is just a policy that changes the risk/reward market for drugs.

Terminology is a big problem when discussing this subject. Free market == laissez-faire capitalism != capitalism in general.

Barter is as natural form of economic exchange as you can get, and it springs up spontaneously all the time. ("Trade ya that comic for my GI Joe!") Money (hard money) is a natural extension of the barter system that adds convenience.

Corporate law is not part of the free market; it provides a benefit to a company's owners that does not exist in a laissez-faire environment, enforced by the government.

In the afore mentioned linked article, Ron Paul evidently queried Ben Bernanke on the morality of the Fed's actions. I really think that is an unfair question for the Fed chairman. I'm sure Bernanke has his personal opinions about the morality of neo-liberal economic policy, but that definitely wasn't the forum for it.

The Fed, like the World Bank and the IMF, have been pushing a neo-liberal agenda for a couple decades. Sure, the upper-crust benefit more than the lower classes but I'm wondering how much the lower classes have benefit as well? I think it's also safe to assume that the upper-crust will benefit no matter what the economic policy is. At higher levels of wealth, it's possible to increase wealth about as easily during economic recessions as it is during economic expansions.

I do think we've seen an increase in standard deviations between lower, middle and upper class with a little flattening in the middle - but I think the minimum of the range is much better off than what we saw before the Fed was established. We also aren't seeing the kind of inverted bell (with a huge skew toward poverty) that typified "third world nations" - and even in what are now known as "periphery nations", we are seeing real growth in the middle class (at least in industrialized, urban areas).

But I guess my question was more a matter of how capitalism provides an environment for economic "laws" to operate more like the "frictionless vacuum" that is supposed in basic physics classes. In reality, the world isn't a vacuum of morality and there is friction in class conflict (especially when class is tied to ethnicity).