Saturday, January 9, 2016


My twitter feed has been aroused into fierce anti-capitalist protest. Welcome to 2016 I guess.

This situation gives me chance to flesh out some important points that cannot be made effectively on Twitter.

Resisting power
My view is that the hashtag has arisen out of a resistance not to the capitalist idea of private property ownership in particular, but the exercise of political power under the veil of capitalist ideology (much like the Occupy movement). Bailouts of banks not for people. Money for weapons and war but not public services. Increasing legal protections for the rent-seeking elites, such as extending patent and copyright protections. Removal of the power for workers to organise in their interests. A hollowing out of welfare based on ideology, rather than an extension of it based on our accumulating wealth abel to shared.

But these types of power conflicts arise in all systems eventually. So while the protest is brought together by a common enemy of the current system, many involved have vastly different ideas about what alternative system would better deliver their desired outcomes.

Mancur Olson spent a career making the point that stable systems begin to break down over time due to infighting over economic rents. That is what we are seeing now, to an elevated extent, in many of the major Western economies. What sort of system do we have that allows the rich to become so insanely wealthy while leaving others poor, homeless, and struggling for find a productive social niche for themselves? The answer is a system suffering from heated internal infighting. My view is that this occurs after a period of stability and a lack of external threats to the existence of the group (i.e. country). You see after a war that it suddenly become easy to distribute wealth to returned soldiers and their families, providing cash allowances, public healthcare and housing. Yet when the war is amongst internal interests, these desirable institutions suffer.

An ecosystem of institutions
What most people want is a set of institutions that allows for private investment and risk taking while ensuring the negative external effects of these activities are limited. They want stable basic services provided in a manner that ensures equitable access, rather than access based on wealth and income. These basic services will obviously expand as nations become wealthier and luxuries become necessities for functioning in the modern world.

Another thing is that some kind of welfare state is essential for maintaining the dynamism of the capitalist part of the economy. Without this cushion against failure, who would risk their life savings on inventing and investing in new products and innovations? Essentially we all want a mixed economy, a level of safety net that reflects the wealth of the country, and basic services provided in an equitable manner. It sounds a lot like the basic economics. Go #MixedEconomy! The main argument is around which institutions can deliver this effectively, given the realities of politics.

The role of economics
Strangely enough, the core of mainstream economic theory assumes that these desirable systems of institutions have already been met. Even more strongly, models that deal with a “representative agent” assume that a government agency is constantly redistributing wealth in the background so that all people are equally wealthy. This then allows the nice results in terms of efficiency to not have implications on equality.

Let me quote from the world’s most popular advanced microeconomics textbook.
The idea behind a social welfare function is that it accurately expresses society’s judgments of how individual utilities have to be compared to produce an ordering of possible social outcomes.

Let us now hypothesise that there is a process, a benevolent central authority perhaps, that, for any given prices p, and aggregate wealth level w, redistributes wealth in order to maximise social welfare. (MWG p71)
So why aren’t all economists raging with the Occupy protestors? Or arguing for a massive redistribution of wealth as an immediate first step to social improvement? Has the discipline sold out to the highest bidder? My view is that economists need to stand up and point the finger at sellouts as a first step in cleaning out this unusually influential discipline, and hopefully in the cleanup process ensure that economic advice arriving at the political level does not suffer from conflicts of interest.

Back to access to political power
Such protests boil down to the inability for the vast majority of people to get a fair say in democratic processes. Obviously bailing out private banks is not capitalism. Severely unequal trade agreements are not capitalism. The Wests selective involvement in destroying “democratising” countries with oil, while ignoring atrocities elsewhere in the world. The inability to invest in public goods in the face of ideological push back by vested interests. They're not capitalism. Occupy Wall Street had similar motives against entrenched interests.

A mixed economy, with a fair share of “capitalist” private ownership of property is a great thing. But when the political power of a select few capitalists overwhelms the system to the extent that the other non-capitalist parts of the mixed economic suffer, there are obvious and genuinely satisfying moral grounds for protest.

Minor tweaks
So what simple changes could #ResistCapitalism argue for? Here are some
  • Annual taxes on wealth 
  • Taxes on inheritance 
  • More proportional representation in government 
  • An independent watchdog seeking out conflicts of interest in politics and business
  • Public investments based on local need, and as a way to support local labour demand
Temporary fixes
Any system will start being gamed as soon as it’s created. We need the general public to continue to be politically active and organised, protesting about particular single policy ideas that could be implemented should the movement gain momentum. Be clear that replacing capitalism does not automatically mean replacing the tendency towards plutocracy or oligarchy.


  1. "but the exercise of political power under the veil of capitalist ideology"

    It has a name - Corporatism. Rule by Large Corporations and excessive wealth.

    "More proportional representation in government "

    That's a fallacy of composition. Proportional representation is about parties, not policies. So you end up with lots of groups of policies in the mix at the end and *it is the people in charge of those groups* that decide the final policy mix based upon their own biases and not the choices of the population.

    It would be better to use a run off system where only two groups end up in the final battle. That way groups are encouraged to form coalitions *before* the election rather than afterwards, and that way people know exactly what they are voting for. And also whether they actually have 'Hobson's choice' due to a stitch up.

    You want less power to controllers of political groups, not more.

    "An independent watchdog seeking out conflicts of interest in politics and business"

    That suffers from the Solomon Fallacy and the 'Higher Law' Fallacy. If you create any overriding power then that power will be co-opted with placemen by the corporatists. Because ultimately it is people that decide power amongst themselves.

    The trick is to push the power out and distribute it. For example making Judicial Review eligible for legal aid.

    1. Good points.

      "You want less power to controllers of political groups, not more"
      Agree totally. But how to get those with power to tie their own hands?

      "That suffers from the Solomon Fallacy and the 'Higher Law' Fallacy"
      Sure does. As I say at the end, any system will be gamed as soon as it's created. But that doesn't mean that the period after a transition won't help clean out the old interests, even though they may gain back their power under the new structure over time.

  2. I'm sure the RC hashtag is a mixture of people who are just discontent with 'neoliberalism' or w/e and people who genuinely opposed capitalism. But don't underestimate the prevalence of the latter group on twitter.

    Briefly, I would make these points in favour of the anti-capitalist camp:

    - Capitalism is inherently based around property rights, which deny the poor access to things they need based on fiat. If a starving man walks into a store and takes a sandwich, he will probably be physically reprimanded in some way. Same goes for the best education, healthcare, jobs etc etc. Without this mechanism being present to some, capitalist firms would not be able to make money.

    - Capitalism concentrates wealth, which inevitably leads to hijacking of the political system.

    - Capitalism needs a flow of natural resources, which leads to imperialism in the places those resources can be found.

    - Capitalist firms, in the main, have no reason to care about the environment and will constantly deplete resources/expand physically/produce waste.

    - Capitalist workplaces are inherently oppressive and based on (unaccountable) hierarchy, repetitive chores and the most work hours the capitalist can get out of you. This is true whether you're in a sweatshop in China or are a data entry clerk in the west.

    - Historically, capitalism was built on slavery, colonialism and racism and the echoes of all these things are proving pretty fucking difficult to shake off.

    It's too early for me to substantiate that last point any further!