Sunday, June 15, 2014 by Christoph Prüm

Taming capitalism

Opinions differ strongly on the question of whether capitalism or the capitalist is a blessing or a curse for people. 

Some blame capitalism and capitalists for poverty in the world. Others show that capitalism has led to unprecedented wealth. After all, they say, it feeds a world population that has tripled in the last eighty years. What's right, is he good or is he evil?


Definition of terms and position by a non-professional

In a market economy, market participants should be able to act freely within a legal framework. Everyone decides for himself about what he does on the market, i.e. about the production, the price and the consumption of goods. Through the interplay of supply and demand, the production and consumption of all goods and services are then regulated - ideally - to some extent automatically. If demand is high and supply small, the price usually rises and production follows suit. And vice versa. Money is the means of exchange with which the various mutual services of the market participants are offset against each other. Capitalism is a market economy with the product money, which is then called capital. The capitalist is concerned with the optimal use and increase of his capital. The capitalist receives a profit for the use of this capital - if it goes well - or an interest rate for lending. If things go badly, he loses his capital. Social market economy tries to protect dependent groups of people from competition through legislation (e.g. labour law) and to achieve a certain balance between economically successful and unsuccessful market participants through taxes and transfer payments (e.g. assistance for life).

Capitalism, the people and the earth

In a free market economy, it is said, the capitalist also enables prosperity for others by providing them with work and thereby income. The raising of capital for which the capitalist strives drives economic development and can benefit everyone. Every larger product, every house, every car, every workplace requires accumulated capital to manufacture it. The positive ideal of capitalism (and the market economy anyway), which is rarely heard, is that the one who sends his capital and his forces in the market to where they are best rewarded, automatically sends them to where they create the greatest benefit for others. That this ideal is partly perverted does of course cloud the ideal, but does not cancel it out. The functioning of the market, i.e. the interplay of supply and demand, reaches its limits above all when market participants are not free in their actions. This is the case, for example, when monopolies are formed: Concentrations of market shares and capital, or even if there is physically threatening poverty. But the entrepreneur learns every day that the market works in principle. We all see that people in a market system, when conditions are reasonably fair, produce wealth without end.

The earth suffers from the people and their economies, that cannot be overlooked. The market as an isolated abstract principle in both trade in goods and capital takes no account of anyone or anything. If each of us makes our decision solely on the basis of what is superficially of private use to him alone, then this short-sightedness quickly becomes dangerous for Mother Earth. Fortunately, however, we are not doing this so consistently, either out of insight, inability or simply out of disinterest in a high account balance.  The question posed at the beginning as to whether capitalism is good or bad is thus quickly answered: it is as good or as bad as we, the creators in the market, the producers, traders, capitalists and consumers, are good or bad. And that is actually correct; shouldn't it be exactly so, the earth in the responsibility of the adult human being? In everyone's personal responsibility? Isn't that exactly the ideal of being human? The only problem is that the unreasonable one can destroy the other's livelihoods. That is where the discussion must begin and the free market economy must find its limits.

Capital can be something wonderful.

Capital is - with reasonable use - practically self-increasing; it is, so to speak, the Gold-Ass from the fairy tale. For those who have accumulated enough of it, it could be redemption, at least the redemption of unpleasant work and economic worries. Adam, as the visionary Hildegard von Bingen wrote 800 years ago, lived in paradise from his property. He "shone" and had great knowledge of all things and beings. He had this knowledge - which sounds amazing at first - because he didn't work! A visionary from the Middle Ages may not be an argument in today's discussion, but if we pause briefly and examine why we work at all, then it seems logical: It's not ultimately the goal of all economic activity, research and work to make life easier and to overcome the necessity of work? To live with knowledge of (and respect for) all beings and things in inner peace out of our property? The term working class does not appear in Hildegard's show of paradise. The term property does, and it clearly expresses a mutual love relationship.

Today's paradise of capitalism, however, has at least one serious flaw. Few are getting richer and richer, while most are currently getting poorer, even if they haven't all noticed it yet. Today's concentration of wealth on a few is probably hardly inferior to the concentration of power on a few during the feudal period. Of great knowledge and respect for things and beings, and a mutual love relationship between owner and property, not much can be noticed after a certain concentration. Seen globally, the inequality is even greater than in Germany, so that capitalism becomes a life-threatening, even fatal catastrophe for many people in its effects. But a paradise in which not all inhabitants are "Paradisees" is an inner contradiction. It's not for anyone, there's no doubt about it.

Capital accumulates most easily with those who already have it, that's what interest does. Interest is also hardly avoidable and sensible, because it is the price and therefore the control for the capital use. What capital does almost without interest, one can observe - as an example - at present at the real estate prices.  Interest is not fundamentally reprehensible in other respects either. Ideally, interest is what my property, indeed my capital, gives me back for my attention and care. The owner, who has acquired capital through useful work and skilful management, is usually not the problem either. On the contrary, those who accumulate capital to make something bigger and live off it in old age are rather a blessing for the economy. The right problems that capitalism poses for us, for society, arise when the accumulation of the same capital stock continues over generations. That is, if the descendants of a family clan with the inherited fortune, which they themselves did not gain, receive a huge advance over their fellow men. The right problem arises precisely when the market does not work because the conditions for starting and participating in the market are brutally different for people.

Because the market is also a monopoly game, but unfortunately not a fair one today.

One of ten assumed players claims well over half of all play money and of all streets and houses right from the start by inheritance law. This alone would make it a perverse game, but it's a perverse game mainly because it's not a game at all but serious, and because the other nine players can't drop out unless they are retiring from their lives.

On the other hand, the option of socializing capital, i.e. dispossessing everyone under communism, has now been extensively tested and apparently found to be inappropriate for human beings. I assume that wherever people are free to decide today, they will in some way opt for property and at least in the medium term for a market system. It quickly becomes clear that the planned economy, i.e. the "artificial" control of capital, which is necessary in the event of nationalisation, is a cramp. There seems to be no alternative to the concentration of capital on a few that our economic system now brings with it. It seems that we have to accept capitalism as it is, with all its antisocial consequences, as inevitable.

Is there even anything we can do?

Yes, what we can do is simple, it's cheap, it is easy to explain, it is moderate and reasonable:
We can create fair, wealth-based starting conditions for the young adults of our society when they enter the market. 

We owe it even to the ruling liberal economic system. According to Friedrich von Hayek, an advocate of an uncompromisingly liberal, market-economy course, the "justice of the rule order" is decisive for the functioning of a liberal system.  According to Hayek, both the demand that "the conditions or the rules of the game by which the relative positions of the various people are determined are fair" and the struggle "against all discrimination" form the "essence of liberal tradition". I know that Mr Hayek did not have inheritance law in mind here, but it should be clear to every reasonable person that in practice it makes no difference whether a market participant is privileged by the state, the law or by a testator.
Capitalism may be without alternatives, but the inequity of opportunity in the current system is definitely not. The combination of a free, performance-based economic system with a completely contradictory feudal inheritance system is the catastrophe of our time, not capitalism or the market economy itself. We should succeed in making the present enormous concentrations of ownership of our world accessible to the general public on a larger scale again after the death of the owners. We will then almost certainly experience a blessing and an explosion of creativity, not just an economic one. If we do not succeed in integrating a certain balance of inheritance into our system, then capitalism will suffocate on its own or once again trigger a catastrophe. When a monopoly player has gathered all the streets and all the money, the game is over for the others. For himself, too.

We need a hereditary compensation system, a Basic Inheritance

We need a modern inheritance law that introduces an appropriate part of the assets that are continuously freed up through death into a broad wealth building process of the population. This can only happen effectively through an inheritance equalization fund and a legal General Basic Inheritance for everyone. This recirculation is the way in which the estates of successful fellow human beings after their death would not cause harm to any individual and would benefit all individuals.
We should urgently rebuild our real monopoly: From a final winner game, which necessarily leads to a crash from time to time and then requires a restart, to a recirculating development game in which everyone wins if it goes well. We should also be aware that a crash today could be such that a new start for humanity would no longer be possible.

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