Essays & Images on Cities, Travel and Contemporary Culture. A web journal of James A. Clapp, Ph.D., an UrbisMedia Ltd. Production


V052-06_evolcapitalismEver wonder where does all that wealth goes when the hundreds of billions, perhaps trillions just “go away”? Well the big boys at Bear Stearns, Merrill Lynch, Lehman Bothers and Avarice and Greed, will probably have more than enough socked away that the selling off of a few houses and yachts won’t put them in too much distress. The top management at AIG will be removed, but no doubt heir “parachutes” will provide them a cushy landing. A few rungs down the corporate ladder things get ugly. Merrill Lynch will be laying off 25,000 into a Wall Street wallowing in ex-Masters of the Universe. Much will depend upon how heavily they were vested in their company’s pension system. Further down are the ones who depended upon what they thought was the integrity of Capitalism and its financial system. These are the folks who bought into the subprime adjustable rates and/or whether the company they work for will be collateral damage in the big popping of America’s economic bubble.

A lot of the wealth was never there in the first place. It was wealth that you could monetize if you wanted to use it to play monopoly, you know, flipping houses, or pretending you live in Park Row by mortgaging yourself to death to have a big house in a gated community, or trips to Vegas, and such. My condo might have dropped fifteen percent in exchange value, but it still has the same value in shelter, view and comfort that it always had. Its high value, like everybody’s, was part of the bubble but, because I didn’t mortgage it out on an adjustable, I’m not looking at it from the street.

Then, a lot of that “housing value” was built on commissions for selling those re-fis. A lot of money was made, as they say, “on the come”; this was money that would be there so long as the risk against some economic reversal(s) would be worth it. It was also made in a giddy-greedy atmosphere that was enabled by thirty years of conservative tearing down of safeguards and regulations. It was too risky. The big boys knew the risks, but they forget to tell the little guys. The big guys usually don’t take the hit until things really start to get bad. They’re bad.

“Fat cats” is perhaps an apt term for the Wall Street boys and CEOs who pay themselves big salaries, commissions and bonuses. Big cats are the top of the food chain in the animal world. The billions of worms and bugs produce the grains on which the millions of herbivores feed, so that the thousands of feline carnivores at the top can dine on the fruits of their labors. It is the “natural order” of things’; a lot of us are worms, some are fat cats.

But, of course we know that the “system” is integrated; the fat cats need the worms. And, of course, the analogy breaks down pretty fast on the reality that we humans are one species, and the food chain analogy involves a myriad of species, all of them well-programmed to act according to the roles nature has assigned them—a scorpion has no desire to be a frog.

So now the question is how to stop the bleeding. John Q loses his house because he can’t meet his mortgage. He’s at the bottom of the food chain. Now there’s an empty house and his equity is gone. He as to stop spending and businesses that used to rely on his spending are in trouble. Sales tax revenues go down, people get laid off, and the economy goes into “survivor” mode. At the metaphorical water hole the fat cats and the big herbivores nudge out and drive away the little critters.

The same politicians who will be eloquent on the individual housing consumers getting in over their heads with mortgage debt and must take the consequences of their injudicious decisions, will quickly flip the argument on behalf of the huge financial institutions—that have been both responsible for dangerous financial instruments and should know better—and fashion an argument that they need be bailed out for the good of the country. The AIGs and Bear Stearns’ get “a (powerful, bought, lobby) vote” in how American tax money is used, the taxpayer gets zip. This is what American “capitalism” has evolved to. The fat cats don’t lose. They grew and clawed their way to the top of the economic food chain, and they threaten gloom and doom if government doesn’t come to their rescue when they have been allowed by the same government of de-regulation to literally “run wild” with their greed.

The great economic ideological battle of much of the 20th century was that between Capitalism versus Socialism. It would, of course, become conflated with their “container” ideologies of Democracy versus Communism but, as we have seen in several instances, particularly in the case of the former Communist USSR and the former Socialistic China, it is Capitalism, however semantically-mediated, that has been the replacement system those Socialistic economies. This may well be, in some people’s minds, the “natural progression” of things. Human beings, they might argue, are naturally inclined (or, if you are Calvinistic, or Reaganistic, divinely endowed) to “possess” property (sometimes even people) and the means of production. And so, in the “natural order of things,” some will end up with more of it than others through hard work (or better theft). Ironically, this evolutionary thinking comes from that part of the political spectrum that draws its political support from that part of the polity that typically rejects “evolution” as the explanatory theory of human change, if not progress. In further irony, that anti-evolutionary support comes mostly from “so-called” Christians who take their name from a 1st century Jewish rabbi who was overtly socialistic in his social thinking. History is scrambled eggs.

The ironies do not stop there. There was great gloating in many Western countries over the fall of the social systems in Eastern Europe and he USSR and he capitulation of Chinese by the 1980s (falsely attributed to the political activities of the likes of Reagan and Thatcher). It’s not so much that their “systems” were unworkable (look a Scandinavia, for example), but that their leaders were made of the same crooked, greedy stuff as ours. Plus, they had the power to enforce bad decisions.

So, they decided to try market economies and the same kinds of people are the “fat cats” of the “cowboy capitalism” systems installed in Russia and China. It is not systems that corrupt people—it’s people who corrupt systems. The irony is that these countries that could not deal with America militarily will suck the economic marrow out of us by buying our debt, making our outsourced products and, in the case of Russia, eventually selling us energy and premium prices. Americans may become nostalgic for the good old Cold War days. They may wish a return to he days in which Mao and Stalin were not just paranoid politicians, but major screw-ups running authoritarian command economies.

Capitalism is the first great “religion” of America. There is nothing intrinsically wrong with the idea of markets or private ownership of the means of production. But concepts are no guarantee against the evolutionary tendencies in social systems toward dominance. If capitalism is about competition for these assets, there is the likelihood—as has been shown—that the virtual “playing field” will, over time, become uneven and the rules will become skewed in favor of the successful to guarantee only success. This is what has happened in America; in Russia and China this stage has been skipped because heir “evolutionary capitalism: has simply grafted the moral features of the previous system upon it.

But the greatest irony in America is that the second great religion of America, Christianity, has also “evolved” to be nothing more than a political organization and mouthpiece for the transmogrification of the social order into the very opposite of what its founder intended.

Natural selection also produces a variety with species that get tested by environment for their suitability. And so we get some odd misfits like fascism, theocracy, and Libertarianism, which is sort of the Scientology of political thought. These sometimes become fairly lengthy branches on the tree of evolution, but eventually die out and return in another sub-species (theocracies), or are rapidly superseded in an induced die out (National Socialism). Notions such as Libertarianism just await the extraterrestrial invasion for which it is aptly suited.

And so, to the extent that the evolution metaphor is instructive, it is Darwin (and Freud) who have the superordinate models within which Adam Smith and Karl Marx (and Ron Paul) must operate. In the lesser models sometimes “shit happens.” But in the big models change is always happening. That’s the lesson of evolution. The fat cats at the top had better pay attention when the worms at the bottom start dying off, or the insects become more venomous. What that usually means is,” you’re next.”
© 2008, James A. Clapp (UrbisMedia Ltd. Pub. 9.19.2008)