Dual Movement

In reality capitalism left to its own devices will cannibalize itself. Because it is silly to assume free markets are free. It is equally stupid to presume markets are self-regulating. Keynesian economics begins with this concept markets are not self-correcting. Because of this unemployment is a natural part of capitalism. Wages are downwardly inflexible because workers will resist any wage cut backs even if the solvency of the firm is a stake. Workers fight for their very survival through employment.

Most capitalist are not risk takers. Investors for the most part do not like gambling too much on dicey markets.  However, when they do gamble they turn to the government to bail them out. If transferring the risk to the taxpayer socializes the risk, risk is minimized.

Hedge Funds are the use of advanced investment strategies in derivatives or leveraged investments. This is unregulated and unprotected selling securities from a third party, buying the assets and selling them back or selling to another party. In order to borrow heavily then to buy still more shares to sell them at a profit. A firm with more debt than equity is leveraged. Buying up bad mortgages, in the hopes some one will buy you out, or the government will bail you out.

Collateral Debt Obligation (CDO) this credit protection allows selling of bad credit. Failure leads to super profits if you buy debts at a fraction of their original worth and then sell them still below their original value but at profit. The last guy standing hopefully will be bailed out buy the government. Either giving you loans at such low interest rates that when things turn around you own assets now worth more than what you paid or government insures your losses.

Hedge funds, overproduction, use of advanced investment strategies in derivatives, leveraged investments, unprotected selling of securities from a third party, bilateral contracts transferring risks to some one else and ultimately the government and on the backs of working class tax payers. It appears to me it is the conservatives who are all for big government when it helps investors without a conscience and against any government if it only helps real living working people.

Think about this next time you talk to a fiscal conservative talking about paying down our debts by cutting social programs, only to give more to the financial investors, i.e. the criminals who got us into this mess into the first place.

If all wealth is theft, then we need to abandon the evil global empire of the IMF, World Bank, WTO, Citigroup Inc., Hedge Funds, Derivatives, and Collateral Debt Obligation (CDO).

At this point both the capitalist and the workers look to government regulation to save the day. But, regulation to limit labor demands and protect unstable markets or protect the general population from speculative investments.

Polanyi studied the Capitalist economy as a self-regulating market economy in his book Great Transformation. In this this study it was shown that an economy free of government regulations needed direct government intervention, sometimes with a great deal of coercion, to get started in the first place. Social obligations taken for granted needed to be eliminated. Free markets needed to be establish over local opposition. Creating artificial markets out of land, labor and money threatens nature, people and the economy.  Because of including these three as commodities sold on the market the cultural fiber of society is rent asunder. The heart of the community is cleaved in twain. The bowels of the human race are ripped in pieces.  All protections against hunger are eliminated. Money becomes a speculation for gamblers and not a means of exchange. Land and nature is polluted and defiled to the alters of the gods of greed and avarice. Free markets would destroy humanity and the planet very shortly if were not for direct intervention to stop the worst excesses of the market. From the beginning of the free market, regulation became central to survival. This is the dual movement of free market capitalism.

Unregulated markets cannibalize themselves in a very short period of time. Social disruption of cultural obligations undermines the basic principles of democracy. This makes a lie of the liberal revolutions. Democracy and a free market cannot go together. Competition leads to oligarchy and not democracy. Democracy threatens the oligarchy and must be kept in check if wealth and power are to be maintained. The political democracy becomes its’ opposite a morally impoverished waist land of competing rational egoists or losers. The ravages of the business cycles replace protections of nature and community. Counter movements begin immediately. With cultures eradicated, social bounds destroyed and life stripped of all meaning anomie becomes the norm. Resistance movements spring up. Reform movements counter what would otherwise lead to revolution. The annihilation of culture and society is because humans are not commodities and labor is nothing more than human biology in motion. Robbed of the protection of culture and social responsibility the wage labor would starve because of the lack of employment when the market no longer needs her labor.

Historically regulations of markets, labor unions, factory legislation, environmental regulations and the ”welfare state” are a few examples existing in one form or another from the beginning. Social movements, failed revolutions and reform lead to protectionism.

Fall in the demand labor is caused by market insecurity and a lack of demand for what labor produces. This leads to a permanent state of underemployment. With fewer consumers non-productive investments in account not related to employment becomes more attractive.

Changes in demand do not cause changes in prices. Ability to buy is more important if a rise in price does not overly stress the consumer. Most people continue to buy a product they like. If the consumer is employed there will be a demand for desired products. In this way demand is critical in determining both output and thus input. Because income is important in influencing both consumption and savings, people save only when they have enough income to meet their other basic needs. When investments increase so do interest rates stimulating more investments. The meaning of all this is speculation and investments happens most when risks are minimal making best guess outlay of assets conservative thus risk avoidance.

By insuring demand production and employment is insured. Full employment further increases demand, which increases consumer spending. The hazard here then is overproduction leading to a failure to sell and thus economic recession. The government then has the responsibility to further create demand through government spending. This helps to sustain full employment and thus maintaining consumer demand. The market economy left alone develops an economy that leads to stagnation and underemployment because investments are always unreliable and overly cautious.

The Substantivist Economists built on the writings of Karl Polanyi. The most prolific would be George Dalton. Like his mentor Karl Polanyi using data drawn from cross-cultural studies in anthropology and historical economics this group of economists openly dispute key concepts of formal economics outside a very narrow historical and cultural application. Marginal utility, supply and demand, cost vs. benefits fit market capitalism well, but not so well in other cultural and historical settings. Traditional economic systems are and were embedded in culturally defined social obligations.  Economic relations are part of socially defined arrangements. Because of this until very recently a free market would be seen irresponsible, dangerous and even immoral.

With the spread of global capitalism everywhere traditional economies and societies are incorporated into a capitalist economy.  But the already existing economic traditions do not die out entirely.  They are radically modified. The result capitalism is a global phenomenon that is going to be quite different in each locality. Capitalism started out in Britain, spread to Western and Northern Europe, North America, Common wealth nations and Japan. From there it spread to every corner of the world.

A grand economic theory is lacking. This is an empirical approach to economics. Each economic setting is going to requires its’ own set of categories and combination of categories to study the local economy. Empirical data and not analytical logic, induction rather than deduction, specific and not general is their approach. In the “real world” there are several sorts of interaction between a household economy, a community sponsored redistribution, and kin related reciprocity or an exchange to make each economic system culturally and historically specific.

Formal economics was designed to study capitalism. In addition formal economics is often pure economics independent of sociology, cultural anthropology or history. A formal economist focuses on the individual acting economic agents.  Production, distribution, and consumption are considered as connected to calculations of costs vs. benefits.  Even under a fully developed capitalist system many decisions are imposed by external concerns dictated by the effects of a market economy, and not a matter of personal choice. This is often ignored.

In most economies the major economic decisions governing economic behavior are integrated into very specific rules governing both production and distribution. Social obligations, the surrounding ecology and even technology all are more important in controlling the principles directing the economy.  Choice is not as important as consumer preference in capitalism. Most we can say it is not as obvious. Most traditional economies are both restricted and regulated by concerns about social obligations. The technology and ecology are often far more restrictive than under global capitalism as international trade greatly expands local possibilities. Choice as central to consumer-based capitalism is a minor part of a peripheral market, if it exists at all.

Because within a community a people share a common social and cultural identity the rules governing economic behavior is well known.  How important these rules are to survival are also well known. In traditional societies, the distribution of labor and labor obligations, the way work is organized, rules governing the distribution of goods and services are an index of political culture, religious beliefs, or kinship obligations. Economic rules are defined as the moral responsibilities of group members.

Market economy or capitalism is an economic system that is, ideally, both self-regulated by market prices and the production for profit is the major goal. This was traditionally seen by all traditional societies as dangerous. Thus, up until modern times, markets, where they did exist, were a secondary part of the over all economy and carefully controlled. Even local markets were peripheral to subsistence.

Social relations in any community are more vital and valuable than profit to the economic concerns of the people. The economy everywhere is primarily submerged in the social relations of that society. Economic activity is motivated, for the most part, by concerns for social responsibility, social prestige, and social security. In tribal and peasant societies the economy remains an adjunct of the sociology of the community. Production is not for profit in the majority of economic activity, and the distribution within society never reflects wealth for wealth’s sake. Social interest of the whole must be used to justify the economy, including systems of production, distribution, or exchange. All social relations within the economic system reflect a person’s moral position within the community. Social ties are social security. Social obligations are reciprocal in both the material and the moral concerns of all, and affect each individual of the community. Economic self-interests threaten the community and the individuals within the community by undermining the collective identity and solidarity of the community.

Polanyi

1.  Production

2.    Distribution

3.    Consumption

Production:

How people organize themselves to provide for their needs and desires, through the tools and resources used in production. Therefore we have social organization, technology and their social and natural environment.

Distribution:

Generalized Reciprocity is when individuals or groups give each other culturally established and obligatory altruistic way of doing business, this is the "true gift" without thought of making a profit.

Balanced Reciprocity is a direct exchange where the two or more individuals or groups exchange for goods or services that are agreed upon as being the same over all value, neither side wants to make a profit, but maintain friendly relations.

Redistribution:

Tribute or levy are paid in money or in kind to a central location and administered by a big man/ woman or a central authority. From there resources can be distributed to the people in need when required,

Consumption:

This is the final use of goods and services by individuals and groups. What determines what and how much is consumed including income, availability of the goods and services and choice if any of what is obtainable.

Economics is the study of how people provide for there needs and desires in their social, cultural and environmental setting. Through social organization, the technology and cultural values strategies are established that are defined historically that are adapted to a specific environment.

Trade

Gift trade is like balanced reciprocity but is formalized by custom lasting several generations through repeated transactions.

Exchange through administered or negotiated trade also called port trade in which prices, trade items and quantities are politically negotiated, agreed upon and set independent of supply and demand or other market forces.

Market exchange

Markets are created for the production for sale and distribution for profit. Markets are designed and operated for profit.

Theft includes looting, racketeering, extortion and blackmail.

Source: Polanyi, Karl (1944) The Great Transformation Boston: Beacon Press

Source: Polanyi, Karl (1968) Primitive, Archaic, and Modern Economics Boston: Beacon Press

Source: Chayanov, A. V. (1986) The Theory of Peasant Economy  Madison WI: University of Wisconsin Press