Recharged Capitalism?

There is an article in yesterday's New York Times by David Brooks describing the decline in America's economic might as the result of a shift from manual/technical labour to office/service work.

He describes what he believes is the gentrification of America today, echoing the societal transition which took place in England as a harbinger of the "End of Empire".

It is a common theme, beautifully illustrated in Thomas Mann's novel "Buddenbrooks-the decline of a family" which is an excellent metaphor for the decline of empire.

Mr Brooks seeks to explain the malaise and discontent in the U.S. today as a cultural shift rather than an economical one. It is an unfortunate distinction.

There was indeed a cultural shift at the end of the 18th century which allowed for the "scientification" of industry in that technological advances were finally "freed" from most discussions of science versus religion and the creation of homo faber.

Many will try and explain that unfettered capitalism is what drove the industrial revolution. They will accept a "cultural shift" that allowed technology to be put to practical use, but they will focus on two other ingredients.

The first is the introduction of the joint-stock company. This is an interesting point for with the joint-stock company we got a better application of capital, and the introduction of limited liability. This is often seen as the "birth of capitalism".

I find this ludicrous. It was a brilliant improvement, which allowed for a more efficient use of capital just as the machine gun was a vast improvement over single shot weapons. But neither the machine gun nor joint-stock companies created war or capitalism-they were both refinements.

The second ingredient is the idea that it is socially acceptable to have massive inequities of wealth. It is the personification of Social Darwinism, which I believe is the never spoken underlying ethos in the U.S.

Everybody has a chance. There are no barriers to entry. All you must do is be a risk-taker, be entrepreneurial, and eat what you kill.

Thus the hatred of taxation by the American psyche based on a false interpretation of the Boston Tea Party .

But there is something more sinister than this afoot.

Unfettered capitalism creates a zero-sum game which rapidly assumes the shape of a pyramid with a very small group of super-rich at the top and masses of the downtrodden and poor with a thin buffer between them of those dreaming of upward momentum and fearing slipping back into the abyss.

Even a Bismarck realised that this structure was not sustainable and although generally known as the father of "Realpolitik", he is also the father of the German welfare state.

All the discussions led by those in the laissez-faire "invisible hand" block harp on on why capitalism in the American version is so successful because since its creation there has been a self-defense mechanism against the rhetoric of income redistribution. I know some that describe this as common sense-and self interest-the middle class pursuing the American Dream of crass luxury.

But I think the argument, and at this stage in the American election process there is definitely an argument, is between spending and taxation. It is a simplification of a complex problem and leaves no room for discussion, or for reflection.

There is a need to recharge the American economy. It does and will be a recharging of capitalism. It will require something which is anathema to Americans, as it is immediately castigated as government intervention and then falls into the pit of "socialism" if not outright "communism".

It is the creation of an Industrial Policy. It will require a shift from pursuing profits through any means which in the U.S. means the service industry and a return to a manufacturing society.