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Thanks for an extremely clear exposition of your understanding of Capitalism which deserves a detailed response.

European Tribune - Comments - Capitalism Must Die!

Capitalism is a system of finance. It is not a system of government, nor is it even a system of management of the capitalist enterprises.

I regard "Capitalism" as a framework within which economic interactions take place. Key concepts to understanding "Capitalism" are "Value", "Property" and "Credit".

European Tribune - Comments - Capitalism Must Die!

One borrows money or sells shares to raise capital. This capital is then used to finance the operation of the firm.

You are here describing "Finance Capital" rather than "Productive Capital".

Finance Capital consists of the "Twin Peaks" of "Debt" and "Equity" legal claims upon productive assets (eg land, machinery).  These take the form of legal protocols, being the contract of secured debt on the one hand, and the "Joint Stock Limited Liability Company" or "Corporation" on the other.

When we distinguish the "Public" sector from the "Private" sector we are essentially saying that "Property" must be either in "State" ownership or in Corporation ownership.

My work is based on the fact that there are other - alternative - forms of "ownership" available, and in fact emerging, which IMHO potentially give rise to a new and "Open" form of finance Capital which does not involve banks as credit creating middlemen, but instead, potentially, as service providers.

European Tribune - Comments - Capitalism Must Die!

Who decides which sorts of new enterprises will be formed and how existing ones will be managed? In the west, it is, ultimately, the bankers who provide the capital. If you come in with a promising idea you will be able to attract capital.

In order to create productive assets, whether in Public or Private ownership, investment and/or credit or "time to pay" is necessary, as you say.

It is not necessary for this Credit to come from Banks - merely conventional. An enterprise may proceed quite happily without going near a bank by dealing entirely in cash or barter or by obtaining credit from suppliers (time to pay) or from customers (pre-payment).

Equally, it is not necessary for investment to be in the form of Equity in a Corporation - merely conventional. I could name half a dozen alternative forms of investment other than a Corporation.

European Tribune - Comments - Capitalism Must Die!

Capitalism requires growth, or there will be no investment.

Yes and No.

Investment (ie "equity") requires a Return on Capital commensurate with the risk involved. There is no reason why this should not be a steady long term income stream. eg utilities.

Interest-bearing credit - on the other hand - does require growth, and this is the cancer at the heart of our financial system, particularly when credit is created which is used not for making productive assets, but for the acquisition of existing assets (especially a "Commons" like Land), thereby causing a "Bubble".

European Tribune - Comments - Capitalism Must Die!

We have some models for these types of enterprises as well. In the past we have had mutual societies (banks, insurance, etc.) as well as cooperatives and employee owned enterprises. Variations on these arrangements need to be explored. It's the lack of imagination by economists, social scientists and politicians that is holding us back. Perhaps new ideas will have to come from the bottom up.

Indeed the future IMHO can only be mutual and cooperative, but the problem has been that the legal protocols applied historically were typically "genetically modified" forms of "Corporation" which limited the scope for "Equity" investment, by limiting the returns available.

Moreover, irrespective of "ownership" of Capital and hence of enterprises, we have always taken for granted that we need Credit Intermediaries to provide development finance, and that "Money as Debt" is necessary, which is in fact not the case.

I believe that the future lies in reinventing finance capital, and indeed that the process has already begun, from the ground up.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Aug 7th, 2008 at 03:18:42 PM EST
I remember some commentary around the time of the fall of Communism that the so-called triumph of capitalism simply presaged a struggle between different expressions of capitalism.

Not just the differing flavours of european capitalism (that the EU is gradually erasing in favour of the American model) but also those from the Far East.

I have no economic background so could not, nor cannot now, give any deeper insight, but I thought it was an interesting idea.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Sat Aug 9th, 2008 at 10:28:14 AM EST
[ Parent ]
While the leaders of the PRC believe that it is glorious to be rich, I doubt that they believe that it is glorious for government leaders to be led around by the nose by the rich, as in Anglo countries.  They still understand that power proceeds from the barrel of a gun and they remain firmly in control of the guns.  They have learned that by letting businessmen do their thing, they can afford more and better guns and luxuries as well.

It will be interesting to see how this plays out.  It seems to me that the Chinese have several real structural advantages at this point.  Nor are they encumbered by any pesky traditions such as Magna Carta, etc.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Aug 9th, 2008 at 07:40:00 PM EST
[ Parent ]
they may have some advantages over us, but they have structural disadvantages such as loose regional control that means their coutnry will face serious problems from pollution, drought, thirst and starvation in the next few years.

I fear the rate of damge is so great that when they realise they have to do something urgently, it will be too late. If the people starve or thirst, no power will save the government.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Sun Aug 10th, 2008 at 05:13:21 AM EST
[ Parent ]


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