(The following was a response to a comment posted on Kurzweilai.net).
I have been trying to figure out how and why capitalism degenerated into the corrupt system now in place and I think I have identified a couple of causal factors.
Firstly, capitalism is driven to turning everything into a commodity to be sold for profit. For example, when genomes were being sequenced and cloned sheep created there was much controversy over whether the very recipe of life itself should be considered property of private companies or whether it was something that should not be possible to patent.
More to the point, the free market needs some minimal government in place to enforce private property rights. But remember: Capitalism seeks to turn everything into a commodity to be sold for competitive advantage. This means the State becomes, in time, just another commodity to be sold to whoever or more accurately, whatever has the most money to purchase it.
Secondly, capitalism tends to look for commodities that are cheap. The less capital you spend in setting up a wealth-making scheme, and the more wealth that scheme has a chance of making, the better. Therefore, there was always a built-in tendency for capitalism to move away from physical products that need actual resources and physical labour for their production, and towards those kinds of ‘middle-man’ services that play advisory and other supporting roles. Crucial, yes, but arguably less so than physical work that produces actual commodities we need to survive and raise standards of living. Thus industry shrunk and was moved around to wherever the commodity of labour could be hired for the cheapest price and exploited as ruthlessly as possible, while the service sector grew and grew. Also, combine the tendency to turn State power into a commodity to be bought for competitive advantage, and the tendency to seek out commodities that use as little capital (in the form of physical resources) as possible, and you get a system that will favour political entrepreneurship over market entrepreneurship. In other words, a system that favours those who rig the game for unfair monopolistic advantage over those who favour genuine market competition. The financial sector are masters of this game, thus it is in this ‘industry’ that we find the most successful parasites, taking wealth others created and giving it to those who contributed nothing to the real economy.
Another thing that aided this wealth redistribution from genuine contributors to mere gamblers is that we tend to stick to outdated language. For example, nobody ever drives a car. Cars are machines, we operate them. Only animals can be driven. The phrase ‘to drive a car’ is a leftover from the time when a ‘car’ was a ‘carriage’ pulled by a horse.
What has this got to do with anything? Well, just think of the phrases commonly associated with banking. They are firms that ‘loan us money’, that offer safe havens to ‘deposit our money’ and later ‘withdraw’ it. None of these phrases properly describe what modern banks do. Usually, in order to loan somebody something you must first have it. I cannot loan you my Ferrari because I am not in possession of one. But banks can ‘loan’ money that they do not have, just by creating it out of thin air! And what about those phrases ‘deposit’ and ‘withdraw’? They make it sound like banks function as piggy banks do- somewhere to keep your money safe and to save your pennies so that they turn into pounds. But, actually, as soon as you hand over your money to the bank it becomes the legal property of that bank. It is no longer yours, strictly speaking. All you have is a guarantee from the bank and ultimately the government that you will be paid an equivalent sum on demand. As Edward G. Griffin pointed out, at the end of the day this promise comes in the form of ‘the State will repay you even if it has to take all your wealth in the form of taxes to do so’.
This obsolete language used in banking terminology comes from an earlier time when bank notes were just receipts issued for gold or some other valuable commodity deposited in vaults for safekeeping. It is not uncommon for us to stick to outdated phrases but in the case of the financial sector I feel this is used to disguise some pretty illegitimate market activity. Look at the terminology used by the financial sector. It is the financial ‘industry’, selling ‘products’ on the stock ‘market’. It all sounds like traditional market activity when what it really is, is a great big casino gambling with wealth others have created and protected from bad bets by that very political entrepreneurship scheming I mentioned earlier. It really pisses me off when politicians go on and on about the need to ‘grow the economy’ when the real economy of goods and services are increasingly being squeezed by parasites who expect massive rewards for their reckless speculation and to dump the consequences of their misbehaviour on everybody else. There was a time when growth in the economy would trickle down to those at the bottom and raise standards of living. That time is now largely over because we in our ignorance have let the free market be taken over by non-contributing forces driven not to make wealth but rather take it from those who do contribute to the real economy.
And., no this is not just the fault of the financial sector and not just the fault of government. It is a systemic issue that is more complex than that.