Crapitalism

Why The Economy (Really) Broke, and How to Fix It

**GLOBAL NEWS NETWORK**
**TRANSCRIPT: ANOTHER INTERVIEW WITH THE WORLD’S RICHEST MAN**

Anderson Tanner: Ten years ago, I interviewed you on the eve of your becoming the world’s richest man. Thanks for agreeing to another one. Your company, Life Inc, became the richest corporation in history by creating a rejuvenation drug, Life. But now things aren’t going so well. 
Umair Haque [grinning]: We’re just facing some temporary headwinds, Anderson. NBD!!
AT: Isn’t the real problem that…you now own pretty much everything in the economy? People gave you their savings, homes, investments, cars for more Life. But now, they don’t have anything left to give you.
UH [grins, sweats]: That’s one way of putting it.
AT [pressing]: So you missed your earnings report, which triggered the biggest stock market crash in history. People are panicked, fatcats are jumping off buildings, the President’s telling people to calm down. What now? Do you feel responsible?
UH: Anderson, I’m here to make an announcement. We have a plan! It’s going to fix everything.
AT: Please, tell us about it.
UH: Well, we’d like to invite everyone who wants to to work for us. With us! To change the world!!
AT: I’m not sure I understand.
UH: People are desperate. They’re broke. They spent everything they had on Life, right? So they need work! Incomes. That’s what we’re offering them.
AT: Wow. That sounds great, Umair! What are they going to work on?
UH: Well…whatever we want.
AT [puzzled]: Like what? Surely part of your plan is a…plan?
UH: For example, Anderson, my son, Umair Junior, needs a new beach house. Let’s go change the world!! We’ll pay them and as a bonus, they’ll get free Life.
AT: A…beach house?
UH: Well, not just any house, Anderson. A ninety-eight room palace with gilded Louis XIV furnishings in the Versailles style. It’s going to take a lot of work!!
AT: That’s what you want to hire people to do?
UH: Oh, that’s just the beginning, Anderson. Umair Jr’s palace is going to need cleaners. So we’ll hire an army of maids. It’ll need chefs! We’ll hire them, too. And you can bet that my kid Umair Jr can’t live without a butler or four. Don’t you see, Anderson? That one beach house alone is going to create an army of workers.
AT [at a loss]:…
UH: And where there’s one beach house, there are dozens!! Why, Umair Jr’s cousins need them, too. My fourth wife wants a new palace the size of Buckingham that doesn’t just have walk-in wardrobes…all it is is walk-in wardrobes!! We’re going to stimulate the economy, create jobs, put people back to work, give their useless lives a point!! We’re changing the world, Anderson. One life at a time!
AT [flabbergasted]: Your plan is to…hire armies of butlers, maids, and chefs? To create a world of servants? Isn’t that like…rewinding the economy back a century or three? 
UH [angry]: Anderson, first we gave people Life. Now, we’re giving them a point to their lives. What are you, a communist? Asshole.
AT: No, I’m not a commie. But I just don’t see how this is progress or prosperity. 
UH [smiling]: It is for me.

**END TRANSCRIPT**

The Extremification of Everything

Here’s what I think the history of post-modernity says.

First, extreme socialism failed. In Soviet Russia, Latin America, Asia. It’s failure was spectacular and unmissable.

Now, extreme capitalism is failing in much the same way. The US, UK, and Japan, the world’s three most powerful economies, have been stagnating for at least two decades by now, and by some measures, as much as half a century. There’s simply little doubt: capitalism is the great failure of the twenty first century, just as socialism was the great failure of the twentieth.

So how have we tried to fix it? In exactly the wrong way.

Consider. For the first time in history, the middle class is a minority.

What does that tell us? Something I think is truly important, profound, memorable. We tried to fix extreme capitalism by making it even more extreme. We’ve upped the punishments for the losers of capitalism — while we’ve also vastly increased the rewards for the winners. We turned wrist-slaps into ritual lashings, and McMansions into gilded palaces. We punish the poor to the point that they break. And we reward the rich to the point that they’re like bloated caricatures of functioning humans who seem not to have souls — maybe because if all you do is shuttle between the jet, the yacht, the penthouse, the beach house, and the Rolls…who needs one?

You know how everything’s gotten more extreme over the last few decades? Religion…politics…TV…hipster beards? So has capitalism. That’s how we tried to fix it. But you can’t usually fix broken things by doing more of what broke them. That usually makes the problem worse.

And so now we’ve turned what used to be simple, moderate, gentle capitalism into something else altogether.

Crapitalism

Is what we have today really capitalism at all? After all, if you’re a CEO, a hedge fund managers, or a VC…you don’t seem to ever face the same kind of effects of capitalism as the single minority mom working three minimum wage jobs just to keep her kids fed. You just don’t seem to lose. On the other hand, if you are said mom, in what sense do you ever win?

So what gives?

The grad school Marxists tell us that this is “late capitalism”. That is, the point of capitalism is to entrench winners and losers into iron classes, and so the only real solution is (wait for it) revolution!! But not just any revolution!! An anarchist revolution!! Quick, comrades — call the cultural theory professors to the barricades!!

That’s a nice idea. It’s romantic and seductive. There’s only one tiny problem with it. It’s failed everywhere it’s ever been tried, usually to the tune of decades of misery. More on that later. First, let’s distill the problem of capitalism with a little more clarity than ideologuery.

I think a better, more accurate description for this system is Crapitalism. It’s extreme capitalism for the poor. And extreme socialism for the rich.

You can think about Crapitalism as a continuum. The poorer you are, the more and more extreme capitalism you must suffer. The richer you are, the more and more extreme socialism you enjoy.

Extreme comes from the Latin for “outermost”. And that’s what extreme capitalism is: taken to its outer limits. The poor don’t just lose social contests for wealth, money, power. They face truly dire life consequences as a result. They die faster, live worse lives, and suffer more physically and mentally. Crapitalism means capitalism as an extreme sport: the losers don’t just lose their incomes…they lose their lives. They’re driven to depression, traumatized, left suicidal. The losers of extreme capitalism don’t just get poor. They get dead.

On the flipside, the richer you get in Crapitalism, the more you’re subsidized. By whom? By the losers! The rich take less risk in investing, saving, earning, and spending. You don’t have to look very far to see examples everywhere. Celebs get endless free stuff, the richer you are the lower your interest rate, the more you can invest in riskless assets, and so on. A rich person can hire an illegal alien to clean their house with exactly zero consequences. A poor illegal alien can clean a rich person’s only at very great risk. The losers are subsidizing the winners in Crapitalism.

As a simple example, every big-box store costs over a million bucks in taxes. But what does that really mean? It means that society’s subsidizing each one. But who is society? Mostly, the middle and the poor. And who is the beneficiary? Mostly, the super rich, who hold not just the shares, but the ancillary benefits — shares in related stocks, portfolios, and so on. Every big box is a machine that literally transfers over a million bucks a year from the poor and middle to the rich. It’s an economic engine that works backwards: it doesn’t produce prosperity. It produces crap: crappy jobs, crappy stuff, non-careers, crappy lives.

In economic terms, Crapitalism is a system made of such Shit Machines, which allows those at the top to shit all over workers, consumers, and taxpayers, who must struggle to clean up their shit before they can attempt to live worthy lives. Crapitalism makes a Shitconomy — and we’re up to our nostrils drowning in the shit it produces.

Marx Was Wrong, But Only Because he Wasn’t Right Enough

Was Marx right? Maybe he was wrong, because we wasn’t right enough. Capitalism is indeed prone to systemic crises of accumulation. Too much capital, in too few hands. You don’t need to look any further than the US to see it. Inequality is now higher than ancient Rome. Not only are the super rich now ultra wealthy — they’ve gotten that way while the middle class implodes. So they’re not as much creating new value as they are extracting value — incomes, savings, assets — from the poor and middle.

But what happens next? There are Marxian crises of capitalist accumulation, which make people rich. Good, fine. Then what? What do the crises in a Crapitalist system do?

Umair the Shitlord, in my little parable above, owns everything in the economy. He’s the ultimate beneficiary of extreme inequality. He has everyone’s home, savings, incomes, investments, cars. So what can he buy now?

You probably think: nothing. That’s it. He’s the richest, and everyone’s done. But you’re wrong. There’s one thing left that he can buy, which is the most valuable thing of all.

People. He can buy armies of servants. That’s what buying people is, right? He can offer people a pittance, to serve him dinner, polish his shoes, and clean his doorknobs.

What happens when the ultra wealthy start buying people in order to create armies of servants? Society rewinds. Freedom becomes feudalism. Culture becomes caste. And so on.

Umair passes his extreme wealth to Umair Jr. He’s even more of a douchebag than his dad. He builds not just one Versailles, but ten. He employs not just a hundred servants, but thousands. Maybe the economy booms, as a result. But no real value has been created for anyone. In fact, the thing that is worth most in the economy, because it is irreplaceable and immeasurable, has been wasted, squandered, destroyed.

The people that are servants can and should have devoted their lives to greater things. Why? It’s not just my moral preference — it’s what is economic. When they’re servants, they’re also not great doctors, engineers, teachers, entrepreneurs, leaders. They’re polishing shoes instead of creating tomorrow’s cancer cures. And so everyone, including Umair and Umair Jr, are worse off. Because the truth is that they don’t benefit much from Versailles Number Seventeen — and they do from cancer cures. That’s how real prosperity happens. Through people devoting their lives to great things — not merely stuck in empty, wasted lives adjusting cravats to hide a fatcat’s jowls.

So Marx was right about capitalism producing crises of capital accumulation. But he didn’t fully foresee just how toxic the consequences could be. Or maybe he did. To be honest, I haven’t read all fifty-seven volumes of The Soul of Man Under Capitalism, nor am I likely to.

The toxic consequences of Crapitalism aren’t just stagnant economies. They are more deadly. Societies rewind into dynastic feudalism as a result of too much money in too few hands. Having rewound into dynastic feudalism, a social system where people are servants, not truly free, societies are in much more lethal trap than merely economies stuck at zero. They’re now places where human potential is suffocated and stifled by design.

The Perfect Martini vs the Hemlock-and-Shit Sidecar

Remember when I said: extreme socialism has failed just as badly as extreme capitalism has everywhere it’s ever been tried? That’s not really up for debate. The examples are too numerous and obvious.

And yet, there are places which seem to have somehow gotten a mix of capitalism and socialism right. Their blend of it hasn’t ended in the Shitconomy of Crapitalism. It’s led, instead, to equality, prosperity, and opportunity.

Scandinavia, Canada, Australia — these are some of the most successful nations not just in the world, but in history. So what did they do right? The answer isn’t just as simple as “social democracy”, or whatever buzzword’s trendy this week. It’s a little, but maybe not much, more subtle.

They have what economists call “mixed economies”. They blend socialism and capitalism, too. While you might think Sweden’s some kind of Soviet Paradise made of blond people, the simple fact is that Sweden’s very much a capitalist economy — it’s made of companies, markets, and private investments, too.

But their blend of socialism and capitalism is very different from ours. For them, capitalism is what the rich face, and socialism is what protects the losers of capitalism. That is, capitalism is not just restrained by socialism, it’s moderated and ameliorated. It’s turned from something like the Hunger Games into something more like the World Cup. Maybe still a little bit competitive and vengeful — but also probably more enjoyable and humane.

So their cocktail is like a Perfect Martini. While ours is more like a… Hemlock-And-Shit Sidecar. The mix in their “mixed” economies is simply better than the mix in our “mixed” economies. It’s more efficient, more effective, and more beneficial, in nearly every dimension which truly matters, from the stability of the middle, to the suffering of the poor, to the pointfulness of the rich. Ours, on the other hand, results in misery, suffering, decline, and stagnation.

Why?

We got the mix backwards. The best social organization for true prosperity isn’t socialism for the rich, and capitalism for the poor. It’s exactly the opposite. Capitalism for the rich, and socialism for the poor.

When the rich face the rigors of capitalism — when they face true punishments and penalties for losing, when they actually have to bear the risks they take — they can’t be such overweening soulless dicks. Let’s go back to the free million bucks every big box store receives from society. Let’s imagine that suddenly, corporations had to bear those costs. What would happen? Well, pretty soon, their profits would erode. They wouldn’t be able merely to pass the bread-basket of mega-bonuses along for not actually having created anything of real value, worth, or purpose. They’d have to innovate, to actually offer more value to people, or die. They wouldn’t be able to get away with such dismal jobs, service, offerings, products…so much insufferable crap.

The flipside’s also true. when the poor enjoy the protections of socialism, they can devote their lives to doing useful things. Remember Umair the Shitlord employing armies of servants and rewinding the clock of social progress back three centuries? To a neo-Victorian dynastic feudalism? That’s exactly what we don’t want. Rather, what we do want is a system where everyone can live up to their potential. And such a system means that every single person in an economy should probably enjoy education, transport, healthcare, the basic and great public goods, at as little cost as possible.

The Perfect Martiniy isn’t the perfect drink…forever. But it is a perfectly mixed martini, the right blend, the correct proportions, the proper temperature, and so on. People will surely invent and create even better systems of social organization. But the point is that like me, I’d bet you’d much rather sip a Perfect Martini than a Hemlock-and-Shit Sidecar.

All of the above teaches us a very important lesson, that flies in the face of our mental models of what prosperity is.

Capitalism Isn’t the Opposite of Socialism

So how come so few nations mixed the Perfect Martini….and so many, instead, drank the Hemlock Cocktail? Why did extreme capitalism and extreme socialism both fail? Because people saw them as opposites. Hence, the world spent a century with both sides tried to extinguish the other. Think about it. Cold war. Left versus right. Nuclear arsenals. Viet Nam. And so on.

But perhaps the greatest lesson of post modern political economy is this. Capitalism and socialism aren’t opposites. They are complements. They’re like two essential ingredients that when put together make a vastly bigger and better drink. Or pie, if you like.

That’s the great lesson of all the above, right? Unless you believe that blond people are genetically superior, or the snow is what causes Canada’s improbable prosperity, then countries with mixed economies are so damnably, incomparably great places to live — not just successful, but also happy, kind, and just — because they’ve mixed a better cocktail.

How can that be? It should be pretty obvious. Let’s take the example of…how you’re reading this, right now. The internet and the WWW.

The internet’s origins lay in military research at DARPA. Researchers were tasked with building a computer network that could never be taken down. They invented the internet. And today, we enjoy it. The world’s biggest corporations couldn’t have existed without it. So a great public investment in research (DARPA) created a historic public good (the internet) which is now used by people, corporations, and financial institutions, to do business in new and transformative ways. But none of this could have happened without a little bit socialism first.

The WWW’s was invented by Tim Berners-Lee. He was doing research at, of all places, CERN — a historic European physics lab. He invented the protocols, and published them. Today, practically everyone in the world uses them all the time. When you’re reading this, checking your Facebook, sending your Twitter updates, surfing the web, browsing for stuff to read, ordering things online — all that creates a vibrant, thriving economy. Well, some of it does, anyways. But none of it would have been possible without a little socialism first. A public investment in research (CERN) created a historic public good (the WWW) which totally transformed society, culture, and the economy.

All of which leads me to this. The greatest mistake of political economy we made in the twentieth century was to believe that socialism and capitalism are opposites. That one is like sand, and the other fire. They can’t, and shouldn’t, coexist — because each contradicts and opposes the other.

Wrong.

Beliefs are troublesome at the best of times. Think of how many beliefs in your life have led you astray. No, that person doesn’t like me. I’ll never get that job. I wasn’t meant to be happy. And so on. We must put our beliefs to one side if we wish to see reality as it truly is, not merely as others, or perhaps even our own demons, have told us it must be.

The fact is that we’ve been told that socialism and capitalism are opposites. But the truth is that they’re complements. Like two compounds that, in the right alchemical mixture, can transform crap into miracles. They can take the crap of competition, selfish assholes, vainglorious douchebags, and turn their tedious envy and greed into things which benefit us all.

But the reverse is also true. In the wrong mixture, capitalism and socialism are a lethal cocktail that transforms miracles into crap. They can turn the tiny miracle of each human life into junk, shit, waste. That mixture is what I’ve called, in this chapter, Crapitalism.

Our challenge isn’t just rebuilding it. The truth is, that’s pretty easy. We simply have to look at societies that work, and do most of what they’re doing. The challenge is freeing ourselves to.

Umair
London
April 2016