Moana Nui conference organizer Arnie Saiki responded to my post On Capitalism, and specifically to my concept of its three phases (1.0 – 3.0 I call them). Arnie is one of the people in my sphere (also known as “the umiverse”) I feel follows and critiques the changing landscape of capitalism most closely. I asked him to expand this response into a blog post, his third guest post for the umiverse.
In 21st-century globalization, this binary construct between Capitalism and Socialism is more elusive now than ever. It’s important to understand that since the 19th-century, Capitalism and Socialism were predicated on ideological conflicts over how to aggregate the frame of economics, each side a variable of how to measure the four pillars of economics: Production, Consumption, Distribution and Exchange.
Fundamentally, if you can imagine that economics as both practice and ideology is a ceiling, ideally, you’d want the four pillars to be of equitable mass to hold that ceiling up. For example, a viable economy makes things, consumes things, takes things from point A to point B, and trades with other countries. Accordingly, manufacturing, agriculture, labor, wages, purchasing power, currency valuation, transport and trade all take place within this system. How these pillars are regulated will differentiate economic systems. Generally speaking, a free-market economy would liberalize regulations of these pillars. Marxism would regulate protections for workers and wages and distribute profits across labor, production, and/or the state, depending on what kind of Socialism you’re looking at.
There are a lot of ways to measure a country’s economy, but the index that has been internationally used since 1953 is GDP. The measurement of Gross Domestic Product is attributed to Simon Kuznets in the 1930s, and it was adopted as the economic indicator that would be used by National Accounting Systems to mainframe a standard measurement of a countries economic health across all cooperating countries (as one of the by-products of Marshall Plan economic cooperation). This is important because the system that measures the value of national economies also determines the value of its currency, as weighted against other currencies in international trade. Without this stabilizing system, international trade would be very slow as merchants and producers would not know how to quickly value widget A with widget B, and so on.
Although it’s a convoluted history, the nutshell is that all cooperating countries deposited a percentage of their assets into the US Treasury, and it was the duty of the IMF to stabilize those currencies and assets against the dollar, which is always measured as “1”, while other national currencies fluctuated around it. As a side note, this was not the original mandate of the International Monetary Fund. The US co-opted the post-war financial and trade institutions as part of their Economic Cooperation. Since the US co-opted this structure, the drafters of Economic Cooperation also wrote the rules of how economies would be measured, and the US expanded upon its own GDP measurements as it favored its own free-market rules.
Both the problem and benefit of the GDP is that it was malleable. The US privileged its own economic strengths in GDP measurements, and soon the OECD (Organization of Economic Cooperation and Development) utilized GDP and would occasionally revise its indicators to meet the needs of the partner countries, while excluding developing countries who were essentially the resource rich countries that OECD members would leverage their economies off of.
So to make a long story short, many of the recent international conventions on the environment, biodiversity, trade and security issues, health and well-being indicators, human rights, etc. are being included into the National Accounting System, and measuring and aggregating all that data into the four economic pillars has gotten a lot more complicated and makes less and less sense, particularly when there is an immediate need to embrace both ecological biodiversity and some of the other international conventions. Many of these conventions have already been aggregated or embedded into new national accounting frameworks, but what is being adopted is still being overly influenced by the US/OECD countries, and no where are these more evident than in the 2015 Sustainable Development Goals and the UN Framework on the Convention of Climate Change.
But as I write this, the statistical accounting rules are in flux with the rise of the BRICS (Brazil, Russia, India, China, South Africa) economies (all non-OECD), and the push by the US to conclude the Trans Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), two massive Free Trade Agreements that seek to perpetuate US dominant influence over the rules of how international economies will be measured. As a side note, for decades Europe has been unsuccessfully trying to revoke the US’s veto power in the IMF. So when China launched the new AIIB (Asia Infrastructure Investment Bank), many of the European countries joined up.
Anyway, this was more of an outline of your Capitalism 2.0– and what you call Capitalism 3.0 would include the financial shenanigans that were constructed around insurance schemes, derivatives, procurement and debt. I would argue, however, that that this Capitalism 3.0 is close to dead, and the only reason it’s on life support is because the global investment regime is pumping money into this system at a loss through another financial instrument called “Bail-Ins.” This is a recent IMF obligation where investors put money into a system knowing that it will take a loss on returns, and does so to enhance attempts of resuscitating the neoliberal 3.0. It’s really a form of corporate subsidizing and is ironically anti-capitalist.
We should really be speaking about Capitalism 4.0, because this is where we are trying to determine how biodiversity and human rights are going to be accounted for and weighted as another pillar in economics.
Right now the Capitalism-Socialism construct only makes sense as a kind of historical revisionism as globalization is now a struggle between Liberalization and Regulation, or Capitalization and Public Trusts.
Globally, new rules over regulations and public trusts could generate an entirely new economic and ecological order that will relegate the Capitalist-Socialist construct to the history bin of Feudalism and Mercantilism.