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Semiformalishmaybe

Intuitions of Ethical Capitalism

I am not a capitalist; I don't believe that capitalism, as a system, is a suitable way to serve the variety of interests that compose the public good. However, if I were to imagine a form of capitalism that would be less bad, I have some intuitions as to principles that would guide that. (I present one here; It may not be very different from ideas I've expressed before)

One of the problems with lassiez-faire markets is that they take a usable mechanism (incentivise productive labour by providing privilege) and implement it in a way that is dehumanising. In a previous writing, I sketched a transitional socialist model using this mechanism; here I suggest an ethical capitalist system; one with adjusted mechanisms for incentivisation.

The basic form of the intuition we consider is that productive labour leads to increased privilege. This privilege may be material, but it may take other forms as well. Labour is not necessarily physical labour; innovations and process improvements also may merit privilege. Capitalism as it exists in America does not lead to what I'd call absolute privilege; there are areas of our society where there are either minimums afforded to everyone (such as access to a lawyer) or where money cannot buy additional privilege (such as police protection, generally speaking). Ethical capitalism would take this further; the basics of health, safety, and dignity would be either given guaranteed minimums or afforded to everyone. On the other side of the intuition, activities that are not easily understood as productive should not generally need to rewards. In a capitalist market system, value is significantly decided by the market; it challenges the suppositions of such markets more seriously to attempt to harness them towards particular public interests, and few representative democracies would be capable of managing this through legislature without much better safeguards against corporate influences than any government we have today. Instead, having an active system of plebiscites to either ban certain business practices (such as short-selling) or adjust taxes associated with them would make them accountable directly to the people (and give industries organised around them reason to make very public arguments as to why they help the public good).

Comments

Although I am not a capitalist either, I understand some capitalist activities as at least potentially- or originally-productive, which do not necessarily look productive at first glance.

Futures trading, in particular, is derived from the idea of a "forward contract" on a commodity, which is simply an instrument that allows someone to buy a promise of future delivery of some commodity. To get from a forward contract to a futures contract, add one layer of abstraction, and make the contract itself tradeable on the open market. This adds the (slight, arguable) value of "liquidity". Even if there is not yet anyone who wants to buy my future-wheat, I can still sell the futures to a futures trader / speculator on the open market -- thus ensuring I get paid for my crop -- and the futures trader can be the one dealing with the risk of future fluctuations in price, instead of me.

This is part of the argument for a lot of weird financial derivatives that one can hedge with -- it's a kind of specialization where producers and consumers, who just want to transact at a fair price and don't need the upside of price swings in their favor, can offload risk to speculators, who accept the risk of unfavorable price swings for the benefit of taking advantage of favorable ones.

It's very arguable whether this system is ultimately beneficial, but the underlying idea of a forward contract is valuable; but I think the more layers of abstraction you add to a valuable financial instrument, the more dangerous it gets, because things people trade without understanding them are very dangerous.
I understand the arguments for futures trading, I'm not certain though that I'm convinced that that's a real benefit to society overall or that it merits the amount of labour that it receives. The stock system in general is designed for efficient (re)allocation of resources to industries in a way that strongly personal favours between participants in the system. Outside of insider trading, it does the latter very well; the distributed and impersonal nature of the system provides strong incentives to own stock in companies that are likely to profit, providing them additional liquidity. Were we to trust that being profitable equals benefitting society, the stock system would probably be reasonable with some moderate replumbing.

I think some of the danger is when people can make a living off of this? I don't know how to do it, but under ethical capitalism I'd like it to be considerably less profitable so that at most investment is a hobby for some portion of society; we still want the incentivised distributed noncorruptable reasoning, but the returns should be limited to providing a little extra on the side (or perhaps treated as a game with leaderboards?).

(P.S. I recognise that we're talking about different kinds of liquidity; you were talking about systemic liquidity while I was talking about financial liquidity of particular companies)

Edited at 2011-02-08 06:21 pm (UTC)
Actually, I think I got my reply to your post a bit wrong. I intend to revisit/revise my response at some point.
Nope, although it looks like an interesting read based on a quick skim.