Tuesday 2 June 2015

Capitalism's inbuilt self-destruction

The fact that capitalism leads to a ever increasing gulf between the rich and poor is something nobody talks about but is quite simple to see when considering the simple elements at play. This increasing separation between the poor and the rich leads to a catastrophic collapse of the system.

Lets start with a society such as we have now. We have a system of laws which regulate the country and pretty much dictates the distribution of power and wealth among the population. The nothing of fairness does not exist as an absolute but fairness is defined as what is allowed within the law. As we see often today, big firms creating huge problems for people around the world while keeping within the law. Business is not fair, it's what you can get away with while keeping within the law.

Given this lack of fairness, there is no break in the system, as we'll see now. We start with a society with a certain distribution of wealth and power, this distribution might even be considered fair by the people. Now lets consider there is a system of law which regulates this society and determines the distribution of power and wealth. Now lets say that under the pressure of innovation (or other factor), this system of law changes at a certain rate under the pressure of society.

It is quite easy to see that each incremental change in law will tend to favour the rich and powerful and they have more influence on the system. So with each small change in the system, the rich and powerful push the system to favour them more and more. As we can see today, the power and wealth becomes more and more concentrate in a minority of the population who continue to maneouvre the system to their benefit while the majority are left behind.

Quickly the unfairness becomes undeniable. A person's belonging to a given strata of society becomes it's most important predictor of wealth and power. Personal traits such as intelligence, charisma, leadership etc become irrelevant as predictors of a person's future wealth and social position. The system is quickly revealed for what it is: an oligarchy - the rule of a few people based on belonging to a certain family and social cast.

Due to the lack of a 'fairness break' in the system we have today, there is no - in principle - limit to the concentration of wealth and power, no limit to the separation between the rich and the poor. The explosion of the system becomes unavoidable as the majority have no incentive to follow the laws of the land anymore and civil war must lead to some form of revolution.

The great intelligence of the powerful and wealthy is in making sure the system doesn't explode in this way. The English monarchy has been very successful in this regard, keeping a lot of power and wealth where the French monarchy lost everything! Such intelligence does not seem to be present today, as the rich and powerful have convinced themselves and most of the population that capitalism will somehow - with a little help from our democratic principles - correct itself. However, as we see political elites are more and more separated from the masses, such that this correction is not operating and the political cast has become part of the ruling class, promoting it's own interests over those of the population their are supposed to represent.

On the bright side such a system cannot go on for long!