This is the first of a series of diaries i hope to post with the intent of educating the users of dailykos normally not particularly interested in the subject.
We americans have a rather bizarre relationship with words. Ask most americans, even kossacks, what "capitalism" means and they will use words like "freedom" , "entrepreneur", "free enterprise. We even have people arguing that it is the prime component of democracy. The reality is capitalism, especially the american flavor, is anything but.
To put it in the most simple and intellectually accurate terms capitalism is the borrowing, lending, and trading of money aka capital. Capitalism at its purest has no interest in business, in goods, in consumers or factories. It has no interest in rules, regulation, fairness, or creation. At its roots capitalism is purely a subset of Usery.
If you state that of course many, for the most part ignorant or illogical people will scream til the windows shatter. You should wonder why that is as capitalism is , indeed, just a word. They'll scream that capitalism is at the heart of all that is good about the west. That it brought freedom to the slaves and equality to women (yes.. they will literally argue that). And this is a central problem of american politics.
Capitalism is the borrowing and lending of money.
(more below).
In america we started out as a free enterprise economy based around massive natural resources. We in fact were for the most part an agrarian economy very loosely based on previous models. A person would either enter into a sharecropper arrangement, or would through some means aquire land and grow crops to feed their families and sell the rest. America was in fact a captive market for the European powers in their proxy war and it is this , more than intellectual concepts of "freedom" and "democracy" that caused our revolution. Quite simply put the British did to america what american corporations are now doing to third world countries. The brits literally forbade americans to produce or buy anythign that could compete with the brit products shipped to america. And thus, a revolution. Your right to speak freely has more to do with the corruption and evil of the british east india company than it does with an intellectual in his study contemplating the magna carta.
Our aversion to this form of capitalism was so strong that the new states quickly put laws on the books severely limiting corporate power. Corporations at the nations start literally had to prove their right to exist on an annual basis. Even so at the time there was very little that one would call capitalism in the states. A rich man might lend a shopkeeper money to open a shop. A small group might get together to found a newspaper at most.
And then came "the stock market". The stock market, specifically the american stock market it he purest form of capitalism that has ever existed. It came to exist as literally.. a market for stock. Eventually it evolved, from very corrupt roots, into what capitalists glorify as their temple.
The early stock market was not, however, simply the great casino we have now. It was quite literally, a place where people could go to invest in a new business. If a rancher wanted to double his acreage, or a wouldbe cattle barron wanted to lay a few thousand miles of rail he could go to the stock market and in effect sell a share of his existing business to get funds to expand. The system was corrupt of course with what we now consider frontrunning, insider trading and manipulation rampant. As it has become again.
Note: this also explains the dichotomy of the american capitalist system. Banks and the stock market were at one time two entirely separate potential sources for investment into your business. That system is long dead.
But all in all this was a better system than any before. While it did tend to aggregate profit to the plutocrats it also created and expanded business and opportunity in ways no other system ever had. It didnt matter if you were black , white or green. If you went to harvard or were just an incredibly good shopkeeper if there was money to be made you could get investment with a little luck. And the system fed on itself. The worker, instead of manning a plowshare and living a subsistance farming life, moved to a city or town. Took his wages and paid rent, bought food, bought luxuries. Each time he did any of these things he created more business opportunity. It was, and is, a pondsey scheme that actually works. It' is the opposite of supply side economics.
All in all though this was a good system, barring the corruption. A farmer could gain access to more land. A silversmith could expand his business. A machinist could set up a shop. That system of course bears no resemblance to what we have now. The system we have now is geared, purely, towards being a giant casino for the non-plutocrats and a rigged system for the plutocrats.
In our current system the root purpose of the stock market, and capitalism, have long ceased to exist. Your neighborhood storeowner with 100k a year in gross revenue isnt even a candidate. A wall street salesman (which is what stock traders actually are) or a member of that ruling elite however can incorporate, spin fanciful tales of riches and recieve millions or billions of "investment". You may have noticed for instance that a companies stock price has almost nothing to do with its profitability or business model. The "internet boom" is the most obvious example of this but the industry is full of such examples. Consider that a company expanding rapidly due to the success of its business model and its profitability can crash its stock by.. expanding and becoming even more profitable. While a company literally running at a loss and with no clear profit model (most of the internet startups and, currently.. facebook) can have its stock go through the roof.
Our system now is the polar opposite of that early system (again.. itself flawed). In that early system there were many forces affecting the corporate head. They were a part of the community. Their reputations were their livelihood. Taking an action that would benefit them personally but would devastate the rest of the local economy would be met with a rapid negative reaction from all those affected including the other business people. And as investment was viewed generally as a longterm affair firing half a towns workers was, at least then, seen as contrary to the long term interests of even the company itself. Those workers, now without jobs, could no longer buy all the companies business partners products. Those companies could not longer buy those products and so on.
That is no longer true in american capitalism. In our system it is seen as a duty for any corporate ceo to fire as many workers as possible and keep their wages as low as possible. If the company buys a business its first reaction will be to "pare it down". To take over its markets and to attempt to install a monopoly. Not to do so is seen as, literally, legally actionable.
We have reverted from a system in which the purpose of american business was to serve the american people and the US economy to a system where the goal of american business is to siphon the assets of both that economy and those people into the hands of the ceo's and its owners. Where the literal goal is not to strengthen the US economy but to weaken it in shortsited self interest.
That system will not stand. We have seen at least four total collapses of american capitalism in the last 150 years. Each time the taxpayer has bailed out the system. Yes.. tarp isnt something new. But we no longer have the assets to continue the bailouts. We have survived off our raw materials. Off centuries of hard work by honest business people and workers to save, be responsible, work for the good of all. And in the last century or so have increasingly sold off our long term interests in the quest for short term riches. Quite literally we cannot afford another failure like the last one. But that failure is coming and soon.
note: Please forgive the very generalised overview and bad writing of this diary. It is very hard to explain a titanic, organic system in a few words. It is even harder to explain the difference between supply side delusion and actual economics.