Rumors of its death

With the ongoing economic meltdown, there’s inevitably a lot of discussion about the failures of our economy, and even about the failure of capitalism in general. From the left side things, we hear the renewed, and probably wishful, suggestion that “Capitalism is dead.”

That can make for some pretty heated debate here in a land where socialism finds so much opposition. You could even say it’s the land of anti-socialism, but that would start a whole other debate.

One thing that would help, I think, would be for each of us to understand just what the other is referring to when they mention the word “capitalism.” Or “socialism,” for that matter.

A lot of it seems to have a leftover Cold War sub-text that means simply “our system” versus “their system.” It gives big-c Capitalism almost patriotic overtones, which really muddies any productive economic discussion.

My own understanding of it is this: capitalism is the practice of lending money at interest — “usury,” in the traditional sense of the term. You can have free markets without usury, you can have private enterprise without usury, you can have democracy without usury. But you can’t have capitalism without usury.

Lending money at interest is a dandy way to gain an income without working at some productive activity. There are a lot of people who support the idea very enthusiastically, and who can blame them? They’ve gotten very used to being work-optional, and tend to take a dim view of any suggestion that they give it up. Since they have grown very powerful because of this trick, it seems unlikely that the system that makes it possible will pass quietly.

The problem with usury is that it creates “free money” — the part that work-optional people like so much — money that is fictitious, in that it no longer accurately represents the amount of wealth in the system. Capitalists admit that a certain inflation rate is inevitable — the economy must grow by a certain percent just to stay even, because it’s adjusting to the amount of money that appears “out of thin air” due to interest.

Sooner or later, a money system like this will become so inaccurate it can no longer function adequately, and the essential prop will be kicked out from under the capitalists. At that point, it may be possible for the system to pass, but again, probably not quietly.

What then? That’s pretty interesting to contemplate, but who knows? “Socialism” seems to be a very general term referring to a lot of related ideas about governance and economics, but I for one can’t tell if it’s really a system in the same way that the capitalist system is.

I don’t think it’ll be rocket science to do something else besides capitalism — there are many ways to do money, for example, other than monetizing the debt. We could monetize labor, with the added bonus that we wouldn’t constantly have to be borrowing from our grandchildren. Lots of technique is already out there — it’s more a matter of political will and support.

But I think the key issue really hinges on the institution of lending at interest. If somehow civilization puts this institution behind it, as it has with, say, slavery, then capitalism will be truly dead and we can tend to our affairs with whatever replaces it. Until then, I’d say we can count on having some form of capitalism, even if it’s held together with Band-Aids and baling wire.

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