The Face of Capitalism (Part One)

(Note: This is the first segment in a three part series.)

A certain group of citizens tends to confuse and disregard the basic principle that capitalism is an economic system.  It is not a form of government.

We begin by straightening out some facts and establishing some definitions.  In 1776 we declared our independence from Great Britain and established a large scale experiment in republican democracy.  We are a nation of laws by elected representatives.  By 1789, with the experiment at serious risk of failure and to preserve internal political stability, we held a constitutional convention.  With a perfect record of attendance by the founding fathers, we ditched our first constitution in favor of our second and present one.  It was a significant but bloodless revolution.

The form of government having been decided, George Washington was elected our first president.  This was at a happier time pre-dating politicians, partisanship and political parties.  President Washington had many important decisions to make, precedents to set, not the least of which was to decide upon a preferred economic system.  His troubles started with the knowledge that the new constitution did not espouse a particular economic theory.  In fact, the constitution said nothing at all about an economic system nor mentioned the word "bank."

To help get things moving, Alexander Hamilton, the Secretary of the Treasury, proposed a system of capitalism based on the highly successful model of the British mother country.  But Thomas Jefferson, the Secretary of State, objected.  He was sure that Hamilton’s proposed system flowed from principles adverse to liberty.  By creating an influence of his department over members of the legislature, Hamilton’s system was calculated by Jefferson to undermine and demolish the republic.  This was a most serious charge, a difference of opinion which also pointed to the birth of political parties.

President Washington sided with Hamilton, reasoning soundly that his plan would provide the greatest good for the greatest number.  Following the Civil War, the forces of capitalism coupled with the onset of the Industrial Revolution enabled our economy to take off.  By the time 1900 rolled around, our manufacturing capacity enabled us to become the #1 economic power in the world.  The rest, as they say, is history.

Capitalism puts money to work for specific, profit oriented ventures.  Through use of corporations, money can be amassed and concentrated quickly and efficiently under one roof.  Typically, investors’ downside is limited to the amount of their investment.

The early capitalists of that era featured names like Rockefeller in the oil business, Morgan in banking, Carnegie in steel, and Vanderbilt in railroads.  They were firm believers in a free, unregulated market promoted by competition.  A new consumer class was created and became a thriving force in the industrial economy.  Its name was the middle class, a new term in the vocabulary of ordinary citizens.

With the incentive to reap great profits, the leading men consolidated operations, streamlined the various systems of production, eliminated redundancies and maximized efficiencies.  While consolidation permitted them to control their industries, a primary goal was still to give the customer the best product at the lowest price.

While capitalists were champions of competition, ironically, their goal was to eliminate competition.  Specifically, they sought to accomplish this by creating and then maintaining a hierarchy with themselves at the top.  This highlighted one of capitalism’s main criticisms.  If left to its own devices, capitalism will by definition concentrate wealth into the hands of a very few.

Many had arrived at the top through superior intellect or other legitimate means.  But some used questionable or even illegal business practices.  Bribes, kickbacks and other monopolistic trade practices were all utilized to destroy competitors.  Human labor was exploited as no more than an expense item on an income statement. Stewardship of the environmental was disregarded. Short term gain trumped any long term considerations.  For this reason these early capitalists were sometimes referred to disparagingly as robber barons.

They used their vast financial resources in an unnatural alliance with the elected representatives of government to cement their place at the top.  In a final assault on equality of opportunity for all citizens, they enthroned their privilege through favorable manipulation of the laws of taxation and inheritance.  And the rout was on over the ensuing generations.

Theodore Roosevelt tried his hand at reforming this growing wealth disparity through various innovations of government.  But it wasn’t until after the 1929 Great Depression and the 1932 election of his distant cousin, Franklin D. Roosevelt, that we learned the hard lesson that capitalism needed meaningful  regulation by the government of its creation.

That government was not simply to be about condoning an economic system of capitalism and the gamesmanship that went along.  It was also about helping its citizens, especially in time of need.  In providing a social safety net, it was about restoring our faith in capitalism by making it seem more humane.

Since those dark economic times, we have ebbed and flowed, debated both in theory and practice through our national political parties the extent to which capitalism should be regulated.

In the aftermath of the Great Recession of 2008, Democrats under President Barack Obama favor sensible regulation as the last defense against unbridled individual greed.  Republicans favor less regulation as the most efficient means of achieving the American Dream.  Democrats see government and business working in partnership for the common good.  Republicans see government, especially more government, as the enemy of business and individual initiative.

(Next week’s second segment discusses how the face of capitalism goes about the business of amassing wealth in present day America.)

-Michael D'Angelo

The Man in the Arena (Part Three)

(This is the third and final segment in this series.  The previous segments (Part One and Part Two) documented the advantages of flying under the radar. But sometimes, flying under the radar just doesn't fly.  More is necessary.  A different approach may be required.)

Are there advantages to being in the arena, as opposed to flying under the radar?  How effectively can light be projected from under a bush?

Despite the apparent advantages of flying under the radar, it is not without valid criticism, mainly highlighted by the old adage that “talk is cheap.”  Anyone can talk, but doing is the hard part.  In truth, there is something most favorable to infer from the image of the gladiator in the ring, as opposed to the spectator on the sidelines.  As Theodore Roosevelt reminds us:

It is not the critic who counts, nor the man who points out how the strong man stumbled or where the doer of deeds could have done them better.  The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes short again and again, who knows the great enthusiasms, the great devotions, and spends himself in a worthy cause, who at the best knows the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who know neither victory nor defeat.

T.R.’s famous Man in the Arena quote was meant as an attack on skeptics “of lettered leisure” who, cloistered together in academia, “sneered” at anyone who tried to make the real world better.

And then there is the following quote from Christ, which appears in the Holy Gospel of Matthew:

Neither do men light a candle, and put it under a bushel, but on a candlestick; and it giveth light unto all that are in the house.

Let your light so shine before men, that they may see your good works … 

It’s both easy and convenient to sit back and criticize, rather than take action.  This is because human nature is such that ordinary people are naturally averse to change.  Change involves the unknown, which generates the fear response in human nature.  It follows logically, then, that the unknown is feared.  It also follows that certain individuals have figured out that ordinary citizens can be controlled en masse simply through use of scare tactics.

This phenomenon helps to explain, in part, Franklin D. Roosevelt’s famous quote, during the very depths of the Great Depression of the early 1930s:

So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself - nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.

F.D.R. was speaking of the Great Depression, and its effect on the morale of ordinary Americans.  He was saying, essentially, that if the mass of ordinary citizens could not shake out of their pessimistic economic outlook, then it would be difficult, if not impossible, to turn things around.  In the election that brought F.D.R. to the presidency, his adversary had campaigned on a platform which called for no change from the status quo.  This despite economic conditions that had brought record and, in fact, staggering national unemployment numbers, hunger and bread lines.

More recently, former President George W. Bush/“43” seemed to deftly transform the tragic events of September 11, 2001 (“9/11”) into a successful politics of fear campaign.  Many have said that his successful exploitation of this particular vice of human nature assured his re-election to a second term.  National security was said to be at risk.  Whether it was or was not involves another discussion.

But, consequently, many of the personal freedoms to which ordinary citizens had become accustomed, including the right to free speech, were curtailed, under the provisions of the Patriot Act.  While there is ample legal precedent for this in US History, President Bush reduced that precedent to an art form, deploying the familiar “Listen to me, or we’re all doomed” politics of fear rhetoric.

Here is seemingly yet another useful lesson in the science of human nature.  Staying the course, and avoiding change, even at seemingly exorbitant cost, is the easier and preferred method.  Human beings are imitative creatures of habit, by nature, comfortable with the routine they know.  Life outside the box (of accepted knowledge or practice), so to speak, is unsettling, even troubling.  Content with the world they know, most ordinary citizens rarely challenge themselves even with minimal risk, perceived to be inordinate and thus unacceptable.

We've all heard the familiar expression that “the devil is in the details.”  Implementing change involves many details that involve experiment and thus can be worked out neither in advance nor easily.  Absent some precedent that provides a known comfort level that ordinary citizens can latch on to, the devil we know typically is preferable to the devil we don’t.  This helps to explain why many ordinary citizens will decline the prospect of a new job.  Even though the potential reward may be greater, the details are unclear, and the risk of the unknown is consequently too great and therefore unacceptable.

Put another way, if you want something you’ve never had before, you have to do something you’ve never done before.  But which is the better approach: flying under the radar or being the man in the arena?  The debate remains an interesting one on the path to human progress.

-Michael D'Angelo