Wednesday, May 6, 2015

Another Amateur Economist: Power and Society in Late Capitalism

greg, at Another Amateur Economist, writes about one post a month. I think, to appreciate his work, I need to spend about a month reading each one.

I didn't spend anywhere near enough time on his The Evolution of Power and Society in Late Capitalism, dated 30 April. But as usual, I feel he is doing important work. I have decided to take his concluding paragraphs, shorten them just a tad, beg greg's forgiveness for editing his stuff, and post it here.

From: The Evolution of Power and Society in Late Capitalism

So, the question arises, why hasn’t capital captured the government before now?

The first reason is the fact that the activities of government are, of themselves, not particularly profitable.

The second reason is that it is often much more difficult for a private entity to capture the return on these kinds of investments, than it is for the larger society. (For these reasons together education, for example, tends to be relegated to the public sphere.)

So taken together, these reasons imply that ordinarily capital will seek greater profits elsewhere. As long as it can do so, that is where its efforts will lie. And as long as it has access to an expanding base of resources, capital will remain dispersed. That is, as long as access to resources expanded faster than the profit rate, capital would remain dispersed. But in recent times, this has ceased to happen, and return to real capital has declined.

Where greater profit can be obtained through manipulation of an economy, rather than providing for it, this is where capital will next turn. Since this process is essentially the wealthy transferring assets from the people to themselves without substantial compensation, it can be expected to be resisted by the government. Thus, the government must be captured by the wealthy before it can be done efficiently.

The final reason that we haven't previously observed capital to capture the government is that one of the most important activities of government is to counterbalance the accumulation and concentration of profit in society. The government must distribute final demand throughout the economy, in order to sustain the people and their institutions. When government ceases to do this, the ability of the people and their institutions to sustain themselves collapses. No society long survives the capture of its government by the wealthy.


Jazzbumpa said...

Pretty good.

But I question his last statement.

I would posit that governments have almost always been owned by the wealthy. Consider ancient Egypt. Was anybody richer than the Pharaoh?

Also, the middle ages in Europe.

Am I wrong?


greg said...

These are good cases, and point out one of the problems with capitalism: As the wealthy gain control of government, the society evolves toward de facto libertarianism. That is, the government becomes just a tool of the wealthy, who come to essentially enjoy all the rights of sovereigns. Just the wealthy, of course. The people, the still nominal rulers, are reduced to being economic resources, or liabilities, as the case may be. However, the historical record seems remarkably sparse wrt libertarian states. In more recent posts, I discuss the reasons why libertarian states tend to fail. Which please see.

I think the issue is multiple and competing centers of power. Unrestricted competition destroys the ability of the powerful to conserve and build on their power. Instead they must expend their capital. Pharaoh and the feudal nobility of middle age Europe were essentially monopolists in all aspects of power. (Because of poor transportation and the habit of local lords to build castles, in middle age Europe, if not nominally so, it was often effectively so.) And as long as they could maintain monopoly and avoid competition, they could take the long view, and conserve capital. I think close examination, however, to show, even here, their success to be mixed. Anyway, with the rise of cities and commerce, starting in the 1400's, these monopolies essentially collapsed.

As for Pharaoh, my understanding is, when things were going right for him, he essentially owned Egypt. He had little competition, and so he could take the long view. That he was not always successful, is shown by the many dynasties of ancient Egypt: 31 dynasties over the about 3000 years BC. So the average length of a dynasty was around 100 years. This is actually not an impressive show of stability, and indeed, suggests the existence of socially dispersive forces. However, the form of government did remain stable, or at least within a regime of stability. An interesting issue in itself.

Sorry I'm so late getting to this, Jazzbumpa. I don't come here as often as I should.