Diatribes of Jay

This is a blog of essays on public policy. It shuns ideology and applies facts, logic and math to economic, social and political problems. It has a subject-matter index, a list of recent posts, and permalinks at the ends of posts. Comments are moderated and may take time to appear. Note: Profile updated 4/7/12

25 February 2011

Capitalism on Trial

Whoever thought that a critical trial of capitalism―at least of the unregulated, muscular, pre-twentieth-century variety―would come in Libya? Truth is indeed stranger than fiction, for that is what is happening right now.

That far-off north African nation suffers under one of the worst dictators left in an increasingly rational world. Now cowed by the US invasion of Iraq, Muammar Qaddafi is just a quiet madman. Unlike Saddam, he actually had a nuclear program designed to fortify his bizarre rule with nuclear weapons. But he gave that program up, voluntarily and seemingly of his own initiative, shortly after the US invaded Iraq.

So Qaddafi appears less of a threat to us and the outside world than, say, Kim Jong Il. But to his own people, Qaddafi is just a step behind Robert Mugabe in utterly moronic and merciless selfishness. And he’s a certifiable madman to boot, prone to giving extended nonsensical tirades that no one inside or outside his twisted regime can translate or understand. He’s a modern Caligula, alive and well in our own time.

Capitalism purports to be a rational system of distributing wealth―in this case oil wealth, which Libya has plenty of. So you would think capitalist markets would applaud the desperate street battles by which ragtag militias, army units and rival tribes are trying to take Libya back from this madman. He’s a vile creature whom only his mother and tribal members who depend on his patronage for economic survival could love. You would think free markets would exult at what appears to be his imminent demise, or at least his imminent removal from power.

But no, that’s not what the markets are actually doing. In the last week, free markets have pumped the global price of oil up 10%. What they are saying, in essence, is that they’d rather have a brutal, selfish, utterly mad tyrant in change of Libya’s oil than whatever coalition of more rational, sensible leaders Libya’s people can cobble together. Better to have a known quantity―even an utter madman like Qaddafi―in charge than an unknown rabble that might kill the goose that lays the black-golden eggs.

Karl Marx died in 1883, Friedrich Engels in 1895. Neither lived to see the twentieth century, let alone the peaceful rise of a labor movement based not on revolution, but on collective bargaining, or the triumph of regulated capitalism under FDR. Neither lived to see the logical conclusion of the abstract system of Communism he had proposed: Josef Stalin’s Terror. Neither was a scientist or quantitative thinker in any modern sense of those words. Both were essentially creative writers reacting spasmodically to the evils of an unregulated, winner-take-all capitalism that created Dickensian England and far worse squalor and oppression in less enlightened places around the world.

So it is not surprising that virtually none of their predictions came true. Their theoretical prescription for human societies was “From each according to his ability. To each according to his need.” Charles Darwin, whose immortal work of painstakingly pure science was just beginning to be generally understood, could have told them that is utter nonsense. Apart from a few, relatively rare instances of symbiosis, life is a selfish struggle for survival and resources. Living organisms, ourselves included, are just not the selfless, altruistic creatures that Marx and Engels posited. Millions of years of evolution made us different. To remold us in Marx’s and Engels’ image required force: hence Stalin's Terror.

So the central tenets of Marx’s and Engels’ creative writing have fallen into the dustbin of history, where they belong. They remain alive only for right-wing zealots to trot them out every once in a while for target practice.

But one single prediction of these two misguided creative writers still remains unproven and unrefuted. From their perch in the late nineteenth century, they foresaw that something might replace the rapacious, oppressive, robber-baron capitalism of their time, which was the only kind of capitalism they knew. They could not bear the thought of squalid mines and factories, with their incessant accidents, injuries, pollution, dirt, grime, injustice and child labor, becoming the permanent State of Man.

They could not foresee the glorious, equitable consumer society that intelligently (and strongly!) regulated capitalism would produce in America in the mid-twentieth century. And so they could not conceive that a better system might arise without the sort of violent revolution that tore Russia apart and stole its mind and soul for seventy years. Nor could Marx and Engels foresee the State of Man then yet to come, in which dying empires (first Britain's, then ours) would attempt to exploit the globe and its natural resources by manipulation, stealth and force, maintaining marvelous, advanced consumer societies inside their borders at the cost of vile despotisms and economic injustice abroad.

That’s why the markets are reacting so anomalously to the imminent demise of Qaddafi’s mad rule. For most of the twentieth century, the great capitalist empires of the West created the next best thing to Paradise on Earth inside their borders, at the cost of not just tolerating, but actively perpetuating, the most vile tyrannies abroad. Democracy and free markets, it seemed, were good enough for the home team but not good enough for the foreign rabble.

That was, and is, an inherently unstable global system. It was, and is, as bound to fail in the long run as monarchy, totalitarianism, and the child-labor sweat-shops of the eighteenth and nineteenth centuries. It is failing right now, before our eyes, throughout the Arabic and Islamic world.

The tragedy and irony is what the markets are signaling they just don’t understand. Nothing in capitalism or free markets requires failure of that oppressive regime to harm advanced economies like ours, or even to rile markets.

What the markets appear to be saying, in essence, is that ordinary people in numbers cannot be trusted to manage resources rationally in their own interest. They require a despot, however mad he may be, to manage it for them, supported by arms, spies and clever propagandists trained and supplied by our very own military-industrial complex. People must be stomped on, their children and their futures made casualties, so that the oil can flow.

That proposition, of course, is self-evidently absurd. In a global free market, the price of oil will rise ineluctably because there is only so much on our planet where we can reach it, and because more people will use more and more of it (unless we develop alternatives) as the good side of global capitalism improves the lots of hundreds of millions of people who previously knew nothing but poverty and disease.

But that sort of Malthusian price rise won’t happen in weeks. It won’t depend on whether or not a madman like Qaddafi stays in power to keep the oil flowing by force.

Unfortunately, far too many unthinking boors in high places, including our State Department and multinational corporations, believe the contrary. They can’t conceive of any way foreign peoples could manage a scarce and valuable resources like oil rationally, in their own interest, despite the fact that global capitalism has created the free markets and modern technology of exploration and distribution for precisely that purpose. They don’t trust the very system they have spent their lives and fortunes building.

That is the trial of capitalism now going on in Libya. Can rationality prevail long enough to let the Libyans themselves, at the cost of their own suffering and more-than-occasional deaths, wrest a more comfortable form of government from their mad leader’s tribe? Can rational, global free markets accommodate and assist their striving, and show them―not by force but with helpful aid and instruction―how to keep the oil flowing, at global (and ever-rising) free-market prices, for their collective benefit?

In the long run, the oil will run out and our species will survive or suffer depending upon its ability to develop alternative sources of energy. In the long run, popular rule will prevail virtually everywhere, or war, pestilence and famine will render our habitat, the Earth, largely uninhabitable. So this present trial of capitalism now going on in Libya affects only our species’ immediate future: your children’s and theirs’. For all their sakes, let’s hope we can at least get this passing phase right.

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