January 26, 2006


I want to talk a little bit about economics. I am not an economist, but I did spend several nights at a Holiday Inn Express, if that counts as a substitute. More precisely, I would like to talk about the economic system of capitalism and many of the misconceptions I hear being bantered around by people who like to think that they know enough about economics to talk intelligently about it.

One of the common misconceptions is that a critique of capitalism is, by implication, an advocacy for socialism, communism or Marxism, take your pick or chose all of the above. The nearly ubiquitous response to defenders of the capitalistic system is to point out the empirical evidence of failure of socialism, Marxism and or communism. However, the failure of the practice or implementation of these other systems is not proof of theoretical failure of the model, but possible failure of management. Businesses fail under capitalism all the time due to poor management…but few interpret the failures to be failure of the theoretical model of capitalism. That having been said, I am not advocating these other systems over capitalism

The ubiquitous juxtaposition of Capitalism in rivalry with other forms of economic systems is an intentional or unintentional obfuscation. People talk about Capitalism as if the primary opponent of the system is other systems in existence. It’s talked about like a sporting event. The Capitalist vs the Socialist or Communist and whoever is left standing at a particular point in time is deemed the victor. Thus, the fact that so many Communist or Socialist nations have failed leaves the impression that Capitalism is the clear victor as it is the last man standing strong. There in lies the biggest fallacy of them all, for the failures of others do not imply your success, unless the others are your true opponent or impediment to success, which is not the case in economics.

At the risk of sounding philosophical, the primary opponent of entities in existence is not other entities in existence contemporaneously, but time. Time is the ultimate opponent of all systems, including economic systems, due to entropy and the law of thermodynamics. Therefore, noting the failures of controlled economies deemed socialist or communist, while capitalism is still standing strong, does not therefore mean that capitalism will not also eventually implode from its merits. Thus, the ultimate measure of superiority, giving that time is the primary opponent in life, is not where something ranks at a point in time, but its ability to sustain itself over time. Capitalism, by its nature is expansive and hyper consumptive, which is unsustainable given that it is dependent upon finite resources.

Think of it like this. Take the lives of two different individuals. One has lived to be of old age, acquired considerable wealth and led an economically productive life, but did not reproduce any children. The other lived a short life hard life, was not economically that productive, but fathered seven children. Who was more successful? By the standards of nature, the latter individual was by far more successful because his actions will propagate his DNA to the future generations, thus ensuring the survival of his bloodline. The former individual, despite all his economic success and wealth is a failure by nature standards because his actions cannot transcend his existence over time, through DNA. That is why the primary objective of all forms of life is reproduction because reproduction allows species to sustain its existence over time and defy entropy.

Now, back to the economic system of capitalism, no matter how much wealth and gluttony it produces, if it cannot stand the test of time it’s doomed to be a failed system, just as the others. The long known secret and key to life is moderation. Capitalism, however, fuels itself from greed, gluttony and unrestraint. It is the opportunity to get egregiously rich which fuels the behavioral motivation component of the system, as economics is more of a behavioral science than it is an exact science. Consequently, the only way to achieve moderation in capitalism is through government regulation or interference in the free market. The free market will not regulate resources via price constraints until they become scarce and near exhaustion and by that time it’s too late when you are talking resources like Finite fossil fuels. Future generations will not have them to exploit to create the type of consumption and production that created the success and wealth in of the system.

The concept of moderation is the key to sustainability over time. If one wants to be able to run a long time, one will have to practice self restraint and pace onesself so that so as to not burnout too quickly, notwithstanding the fact that one can go much faster. In order to achieve this pace of moderation, regulation of your muscles by conscious thought (the government of your body) must take place. Capitalism cannot do this because regulation and conservation impedes the free market and the more you regulate and conserve by government mandate the less you are practicing free market capitalism.

In conclusion, capitalism needs to be analyzed, and criticized when warranted, with respect to the test of time and not measured against the failures of other systems. Capitalism cannot sustain itself. If it is true that the standard of living of the Global West is based upon the practice of capitalism, then the ubiquitous spread of the model throughout the world should replicate the massive production and consumption levels across the planet. I doubt very seriously that the finite energy resources that fuel modernity can sustain this hyper consumption levels across the globe. Before long, resource wars would result in the destruction of nations as economy's and lively hoods would be dependent upon diminishing reserves of energy resources, increasing tension and conflicts. Capitalism’s dependency on cheap oil to fuel it will not be seamlessly reinvented out of either, without a radical global depression brought about via resource depletion and wars.

Capitalism ulitimate savior will be moderation by government mandates....which will mean that its savior will be its behaving more socialist or communist like in regulating and controling markets. In other words, the salvation of people living under capitalism, when the system implodes, will be manifesting less capitalism.


At 10:41 AM, Blogger bombsoverbaghdad said...

Noah and/or

Thanks for coming by thestateof.com. I've been coming by here and reading, and I always enjoy your posts. As you know, you have a great way with words and a strong, black intellect. (Post more!!!)

I agree nearly in total with your post. Both capitalism and socialism have their strong points, but both are unpure and will always degrade. For a great example, I look at the time period before the beginning of Social Security. During that time, the poorest Americans were the elderly. This phenomenon became intolerable, and a socialist construct--unearned payments to the old folks--was started. I look at capitalism and socialism and a pendulum, shifting according to the needs of the times. At present, though it seems like capitalism is running wild, it's not. There is still a social safety net, though it is under threat. The balance, it seems, is to maintain efficiency and, perhaps more importantly, worker motivation. Good stuff.

Feel free to submit guest commentary on my site anytime.

At 11:02 AM, Blogger Noah TA said...

Thanks for the kind words bro. My take on economics is a little different in that I filter it through the laws of prism of physics. Economics is a behavioral science dealing with what motivates people to their most productive ends and is predicated upon assumption of human rationality. The physical laws of the Universe are based upon matter and Energy. I look at economic systems, therefore, based upon their impact on matter and energy, as well as their environmental impact. I don’t believe, based upon the law of physics and closed systems, that there can ever be a net gain in nature. Thus, every action has an offset. We all know the success and wealth produced from capitalism….but given the physical laws, what’s its offset and consequences? Certainly its cost is as great as its benefit and that cost is not real-time, thus, for a window of time the benefit is received without paying the cost and everything seems great….until the cost come due. None of these systems are superior to the other as practiced, because neither can produce a net gain in nature.

Look at the poverty of the Africans. It appears that they are failures relative to others, but the truth is, Africans are the most successful people on the planet based upon the fact that the fertility rate of Africans, notwithstanding war and disease, is 7 times that of the richest race on the planet, who are actually trending towards extinction due to declining rates of birth. The success of modernity and capitalism is altering the ecosystem also, which may make survival in the future more difficult.

At 12:25 PM, Blogger bombsoverbaghdad said...

Interesting. From what do you derive your theory that there is no net gain in nature??? I've never heard that, but it makes sense when you use your economic analogies.

You should check out Mahndisa's Thoughts, a blog linked on my site. She's a physics/political girl. Smart.

At 2:29 PM, Blogger Noah TA said...

Actually it’s not my theory, but another way of presenting the laws of physics in a “closed system”. For all intents and purposes, our system is closed with the suns radiation being a CONSTANT external source into the closed system which creates life. The proven laws of physics are that once a system is closed; there can be no gain or loss of matter or energy, just transformation of matter and energy in time and space. The total amount of matter and energy in a closed system can NEVER change. E = MC2 is a physical law proven by Einstein. Thus, when talking about economics or anything involving matter and energy, the physical laws of nature takes precedence. Consequently, any gain of matter or energy must be offset by a loss of matter or energy in time, space or form. When you look at the world based upon the laws of physics, it becomes easy to understand how European peoples got so rich and how their getting rich disenfranchised and impoverished so many other people. Many of the natural resources that Europeans used, including the resource of human energy and capital, was taken from non white people and transferred to the benefit of the capitalistic system which was the instrument for white supremacy and hence allocated opportunities to those within the system based upon classification of racial ordering. In other words, it was seesaw economics. Whites lifted themselves up by lowering other people. No net gain for humanity, but a net gain for white folks.

At 7:33 PM, Blogger RaAmen said...

Damn bro.....Seesaw economics..In my opinion some of your best work comes when you espouse upon capitalism and its inherent inner workings.

You've made some valid points and caused some serious thought provoking on my part in terms of a future course of action. As me and Faheem would say back in the day.....Your dropping BOMBS!

At 7:38 PM, Blogger Scott said...

"Capitalism, by its nature is expansive and hyper consumptive, which is unsustainable given that it is dependent upon finite resources."

Your axiom state above is wrong. Thus your conclusion is wrong. Resources are not finite. On any human time scale.

"With the development of nuclear energy, it became possible to show that there are no apparent obstacles even to billion year sustainability.(1) .

A billion years is unimaginably far in the future."

At 4:31 AM, Blogger Noah TA said...

Scott, the resources that modern economies are dependent upon is not Nuclear energy. Nuclear technology is primarily employed for weapons of mass destruction, notwithstanding nuclear power plants scattered about....many of which are not safe and have leaked. You cannot spread Nuclear technology, as a substititute for finite fossil fuels, without spreading the technology and means of producing weapons of mass destruction. Moreover, the transition to another source of energy will not be seemless and will only come when the shit hits the fan in regards to hyper consumption of capitalism exhausting fossil fuels. A global depression will be the resultant....one that will make America's great depression a times to wish for.

You obviously don't know much about physics scott if you are arguing against the concept of entropy and the dacay of matter from usable energy to non usable energy. Sure, as long as there is matter there is a source of Energy....but modernity is totally dependant upon one particular source of energy which is finite. Its addicted to it like heroin....and withdrawl is gonna be hell.

Your problem scott is you keep reading "in the box" propaganda of the system....instead of thinking deeply for yourself based upon physical laws and nature.

At 10:54 PM, Blogger Faheem said...

It is almost impossible to explain anything to a greedy capitalist who will suck money out of anything and anyone as much and as long as they can. I was talking to a white woman last night at this part time gig I am holding down pending my escape from California, she and I were talking about copyright laws, she being a professional photographer and I a consumer with understanding of copyright laws in regards to photos. She and I were going back and forth with my arguments asking the question how long and how many times and at what point does a photographer come to believe he or she has made enough money off a photo they took of someone thus releasing the ownership or copyright of the photograph to the person of whom the photograph is of to do with it what they please. My contention again was, I pay you $2000 to take pictures at my wedding and produce an album for me, and later on I want to take some of the photographs and make a calendar, a poster or whatever and to do so I have to pay you more than double what I can pay someone else to produce one of the aforementioned products and or pay you the price of the product from you to get the copyright to my photo for a “one time usage” in making the item I want. In the end the discussion turned political as I said to the young white woman, I now see the problem between you and I; “you think in terms of a capitalist and seek to continue to make money off someone who have spent thousands of dollars with you even after you have reaped far more money than you invested in taking the photograph or maintaining. Needless to say that angered her and she started loosing her cool.

The failure of capitalism is all around us everyday, in the news and in corporate America. As I noted on aa.org, outsourcing and companies moving their business offshore is proof of the failure of capitalism to sustain continued growth and economic uplift of the people whom live in a capitalist nation. Not only does the United States have a need for cheap labor outside the country but it has just as much a need for cheap labor inside the country, thus Latino men and women pour across the border in order to supply bodies for America’s capitalist need for cheap labor. As I stated on the forum, once the standard of living has fallen in America, and all markets have been affected by it and the men and women in America particularly white folk have become desperate for money making opportunities, these companies that are now offshore will return to America as the saviors because they can not get cheap labor across the board hear in the U.S. where most of their products are sold and used and capitalism will continue to look like it works but as you noted time will eventually express the flaw in capitalism.

At 8:14 AM, Blogger Scott said...

Noah, you might not be a drinker, but about two years ago a new drink was found in bars, its call a Rumarita.

Did drunks decide that they didn't like tequila anymore? No they didn't.

What happened was the price of tequila went up. So people subsituted Rum.

This is what happens with any resource. The building I live in use to be heated by coal, its is now heated by oil. If the price of oil goes to high we can switch back to coal.

In fossiel fuel, there is coal, tar sand, oil shale that can easily replace in the short and long term.

The argument that we have limited resources is WRONG. Do some research.

I am sure you have read some articles on Peak oil and think you know something. In fact people have written entire books about it. They are ALL wrong because they don't understand basic economics that are true no matter wether you are a capitalist or communist.


"Why $5 Gas Is Good for America
The skyrocketing cost of oil is sending pump prices ­soaring. It's also subsidizing research into technologies that can change the energy game. Plus: As Prices Rise, Technologies Emerge"

At 6:53 AM, Blogger Noah TA said...

Instead of saying anything Scott, since you obviously are not thinking for yourself, you should just post your links as your dissent. Do you actually think that I have not integrated things you have mentioned in the formulation of my conclusion? You are not providing new information Scott.

Sure, there are plenty alternative fossil fuels, but none of them can energize modernity as CHEAPLY as oil has. Consequently, a shift to other forms of energy creates resource driven inflation that reduces the purchasing power of consumers and reduces purchasing power leads to reduce production of goods and services which in turn increases unemployment poverty and the like. Inflation is a cancer to economies…or don’t you know that? Maybe you need to find a link that will teach and demonstrate that to you.

The issue is not oil or nothing. The issue is the cost of oil vs the cost of the alternatives and the resulting inflationary impact caused from having to go from one form to another. You also have to consider the environmental impact…like global warming from increased burning of fossil fuels. Just image how fast the earth population is exponentially increasing…and along with it the consumption of these finite fossil fuels. Even if we don’t run out, which we never will, we will reach a point where the price is so high that it constrains levels of consumption and production, strangling economies. Moreover, the damage to the environment will eventually reveal the other cost of consuming all this energy into one form of matter into another…like into dangerous greenhouse gases.

You make a poor argument Scott….piss poor.

At 9:08 AM, Blogger Scott said...

Noah as always you refuse to even to try to learn some economics. I give you simple easy to understand examples with tons of supporting data. But since it doesn't agree with what you pull out of your ass you disregard it.

I wouldn't even say anything but you are leading others astray. Your motives are good but ... You don't have the knowledge or the understanding to "get" it.

The fact is we have the technology today to make homes that use ZERO energy. It add about 20k to 30k to the price of a home, and requires a radical rethink in design. The increasing oil prices will drive this technology into the market and keep our standard of living going up. The price of oil has Tripled since 2003 without causing a recession in America. Inflation is still near all time historical lows.

Why don't you take a 1/2 hour and read the article from Wired and learn something.

At 11:22 AM, Blogger Noah TA said...

Scott, you don’t get it. Even if what you are attempting to link me to is true, it does not mean the transition will be seamless. I am not arguing against the concept of technology, but rather the effects of being dependant on a particular form of energy. The free market will only promote other sources of energy when it become cost effective due to the scarcity of the other source increasing the cost to be that’s near the alternative. There will not be a seamless transition and the energy issues of the world cannot be looked at through the prism of America only. You not adding 30k to the cost of a new home, when median home prices in America is already much higher than median income earners can afford. Moreover, what about the billions of people who live outside the US…can they afford that 30k extra?

Indeed, what most of these alternative energy sources proponents will not tell you is that they are dependent upon oil to produce. In other words, oil is utilized in the production of many alternative energy sources and if the price of oil rises so will the cost of producing the alternative energy source.

At 11:28 AM, Blogger Noah TA said...

And another thing….who is going to pay for the tearing down and reconstructing of the millions of homes in America so that they can become these energy efficient models you talk of? The point being is that the current infrastructure and construct is designed around particular energy sources and not this new technology that you are talking about. Therefore, everything would have to torn down and reconstructed. Its absurd and not feasible.

At 8:46 AM, Blogger Smitty said...

Not only is it not feasible, economically (within the current economic ideology), because of social racial dynamics and who might benefit from what Scott is talking about(non-whites) it is politically impossible as well.

The funny thing about what Scott is saying is that, the presentation of these ideas regarding the possibilities with technology don't invalidate but underscore Noah's argument. The reason these things won't happen is because of capitalism and the need for short term gains not long term sustainability. And because Scott or someone like him will go here, it's not an deviation of capitalist thought that makes this impossible. Short term motivation is the essence of capitalism. So all these technological advances and the possibilities they represent that can be read about all over the place now, are further evidence of the main idea of Noah's original post, not arguments against it.

At 9:48 AM, Blogger Noah TA said...

That’s and excellent point Smitty, everything about the nature of capitalism is the short term. Any efforts to think long term and initiate policy and practices based upon the long term undermines free market economics, because such efforts will have to be forced by government regulations. Indeed, profit is the primary motivating factor of the system and until these other sources of energy are seen as profitable, not much research and development will be put into it….because there is not profit incentive. Hence, there will not be a profit incentive until the proverbial shit hits the fan and the energy supply starts to experience diminishing returns, which means that the price skyrockets, which makes other expensive forms of energy competitively feasible.

With all due respect, Scott simply reads other peoples opinions and does not sit down and think deeply for himself. That is why he always has to prove links to make his argument….because….its not HIS argument….but one he adopted for politics or for comfort.

At 3:31 PM, Blogger Kweli4Real said...

I got to this thread late, but I have to agree with Smitty. It is the nature of capitalism to maximize short-term profits in the face of scarcity, not seek alternatives.

Witness the automobile industry. It has had the technology to produce 50 mpg carbs, 50 years ago. The symboic relationship between the auto industry and the oil industry conspired to keep this product off of the market.

The prospect of $5.00 per gallon, has not prompted a shift away from fossil fuels; rather, it has accelerated drilling and exploration, while slowing alternate fuel technology research in the very industry with the expertise [and resources] to bring an alternative to market. But that's the essence of Capitalism.

At 3:44 AM, Blogger David Mauro said...

I do have a degree in economics and reject the premise you present. How many times over the course of time have we witnessed the failure of Socialism? There are flaws in your argument that I will respond to.

First, you ultimately conclude that capitialism can only succeed as long as there is oil available. Capitalism goes back to the beginning of time. As it relates to your argument, capitalism is the reason this country was founded and prospered. We achieved prosperity never before seen on earth in the 125 years BEFORE the automobile. Capitalism worked wonders then - before oil.

The reson capitalism works is because it is based on the LAWS of supply and demand. These LAWS inherently control resource consumption. As supply of any commodity or product diminishes, price goes up to maintain an equillibrum. When oil pipelines were affected when Katrina hit, gas supplies were low and price responded accordingly by going up. This changed the behavior of gasoline consumers. Thus the 'resource' was conserved. This same principal occurs on a global basis when there is limited supply and unlimited demand.
You condemn capitalism because of 'greed, gluttony and unrestriant'. There is no such thing as greed. It is the incentives of wealth (enormous or not) that motivate people to achieve. There is no reason to achieve in a socialistic system. Everyone makes the same amount, and if you work 2X harder, you don't make any more money. What's the incentive. Why not work half as hard and make the same amount as your nieghbor. This invariably happens, production falls, wealth erodes, people starve and revolutions enuse.

People desire the freedom to make their own decisions, to acheive as best they can and when there are no barriers to doing so, people achieve so much more. Thus the choose capitalism.

So bottom line, socialism has always failed not because of 'poor management' but because of management. Capitalism has proven itself for thousands of years and is the only system to bring prosperity to anyone who wishes to attain it. Oil has nothing to do with Capitalism and I can assure you that capitalism can and will sustain itself as long as people like you don't use government to 'regulate' it.

Take a look at France today. Socialism always fails. Always.

At 3:45 AM, Blogger David Mauro said...

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At 6:08 AM, Blogger David Mauro said...

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