Home > Finance and money > A Predator State – the worst bits of Capitalism, Communism and Feudalism

A Predator State – the worst bits of Capitalism, Communism and Feudalism

We live in a Capitalist country, right? We believe in the power of markets, don’t we? That’s what seperates us from the spectre of Communism that haunted us from the 1950s to end of the 1980s, isn’t it. And we understand the theory: a Capitalist country achieves the most efficient allocation of resources by facilitating trade & commerce by the practice of prices, and price only. No plans, no dictates, no sentiment. The market connects buyers and sellers, and the price mechanism is what determines appropriate supply and demand to achieve the economic nirvana of equilibrium.

But, just to soften the edges, we have a bit of a heart too. The Gvt still dictates certain aspects, but they are the there to help keep the country and economy moving. A national health service, education, a defense force and social security. A supportive collective spine from which hangs our supple private sector muscles allowing us to punch above our weight. So we actually have a lovely mixed economy with the best that Capitalism & Socialism can offer.

Sounds plausible doesn’t it. But hang on a moment. Following the crisis in 2008 it seems we took a slight detour from this.

In the face of bank collapse our politicians ennacted sizeable bailouts. A state bailout of a private sector business is not a free market solution. In fact quite the opposite. In this instance, the bailouts have protected the lending class (creditors / bond holders) at the expense of the public at large.

The consequence has been Austerity and Inflation. Measures that assure that the lender bears no responsibilty whatsoever for their faulty judgement in lending out in the first place. It is debt maintenance by any means necessary.

Yes we have a mixed economy, but one that is instead the worst of both worlds; privatised profits and yet socialised losses.

It is a form of Crony Capitalism, and a slipperly route back to the retrograde structure of Feudalism. It is what James K Galbraith calls a Predator State. The state as monopoly collector of taxes and corrupt distributor of the spoils to the private sector. This is not the free market vision of Adam Smith:

“What did the new class… set out to do in political terms? The experience of the past decade permits a very simple summary explanation: they set out to take over the state and to run it — not for any ideological project but simply in the way that would bring to them, individually and as a group, the most money, the least disturbed power, and the greatest chance of rescue should something go wrong. That is, they set out to prey on the existing institutions of the American regulatory and welfare system.”

Predator State

But this message isn’t being voiced by any policitician, or even any economic or political commentator. The closest to this I’ve heard lately is from a recently elected Northern European party leader:

“In a true market economy, bad choices get penalized. Instead of accepting losses on unsound investments—which would have led to the probable collapse of some banks—it was decided to transfer the losses to taxpayers via loans, guarantees and opaque constructs”

Why can’t any major mass movement whether from the left or (especially!) the right, the Union’s, the Green’s, the NGOs, Anti-Globalisation or anti-cut movements use explanations such as this to tell the true story of this crisis?

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Categories: Finance and money
  1. john m
    June 12, 2011 at 10:19 am

    Glad to see a bit more activity here, Ive been mining the nef in the little time ive had this last week or so, thanks for that.
    I always look to natural models for insights into human affairs and i cant help but see parallels between social insects and our attempts to organize ourselves on a grand scale, where they use pheremones we use memes. I know nothing about game theory but there must be a model which shews the inevitability of the concentration of power into fewer and fewer hands, and, in human affairs as long as the memes hang together consent is assumed,by the center, from the nullification of the power to demur, in any practical manner, of the ‘masses’. In some ways one could consider this social insect model to be the preferred option for U.S. client states, a small cosseted elite leading a ruthless sociopathic warrior/police class exploiting an intimidated populace who are allowed just enough to maintain their usefulness. Not that the u.s. are unique.
    In the social insects who are in intermediate states when the pheremones break down a revolt takes place and the menopausal ‘queen’ is slaughtered by her one time slaves who are too old to attempt to emulate her.
    There’s probably a book to be written about the interplay of game theory, [market forces?] impelling us to move to this model and the natural reluctance of a species ‘designed’ to have about 150 relationships to conform to it and the manifestations of the dynamics of that conflict down the ages. Personally i think until we understand the hellish future the steady concentration of power into ever fewer hands leads to, not for just the ‘masses’ but for the extensive ,now shrinking middle classes, we’ll never be able to design a political model that allows for 6.8b/150 mini empires that have more or less the same clout.
    I think capitalism, fuedalism and communism [ religion royalty and banking too] are just different mechanisms that concentrate power and that the people ‘lucky’ enough to be players are victims of circumstance as much as anyone is, not that that excuses the consequences of their decisions, and beyond predatory it ‘s become more like the relationship between cows and grass, or rather elephants and the leaves of the last few trees enduring a drought.

  2. June 12, 2011 at 10:49 pm

    John

    Thanks for the comment. Yes the tempo has picked up a bit on here, but I’m a bit behind in replying to people as I’ve been quite busy this weekend.

    You are right to note the forces of “Power concentration”. The post “Wall of illusions” deals with this too, in that Polanyi positions power concentration as something that is tolerated by society as long as the wider needs of society are met (think of Egyptian Pharaohs as early example of this). Sometimes this power concentration can support social cohesion (e.g. Tito), but if it becomes parasitic then society reasserts control (e.g. French revolution, Arab spring etc.).

    You make some interesting points about modelling this dynamic. I’m soon to be attending a course on Agent Based Modelling which seems the most appropriate technique for tackling this sort of problem. I doubt I’ll be able to undertake anything as profound as your description, but was planning to use the course to demonstrate that prevention of debt default leads to wealth concentration. Will keep everyone updated on progress.

    In the meantime, I hope you stick around and enjoy the debates and discussions!

  3. July 11, 2011 at 11:00 am

    A choice quote that I have just read, which sums up this whole premise:

    “Capitalism will never fail as long as there is socialism there to pay for its failures.”

  4. February 27, 2012 at 5:40 pm

    In a very similar vein to this article is Charles Hugh-Smith on “The Perfection of Crony Capitalism: Use Regulation to Destroy Competitors” :

    http://www.oftwominds.com/blogfeb12/crony-capitalism2-12.html

  5. Anonymous
    April 19, 2012 at 8:15 am

    More from Charles Hugh-Smith on Crony Capitalism:

    http://www.oftwominds.com/blogapril12/crony-capitalism4-12.html

    “The Central State is granted the sole power of coercion by its membership (citizenry) to protect the membership from the predation of individuals, concentrations of wealth and other subgroups seeking monopoly. They grant the State this extraordinary power to insure that no subgroup or individual can gain enough power to dominate the entire membership for their private gain and to protect freedom of faith, movement, expression, enterprise and association.

    Granting this power to the State creates a risk that the State itself may become predatory, supplanting the parasitic elements it was designed to limit.”

  6. December 24, 2013 at 12:43 am

    I every time spent my half an hour to read this weblog’s articles or reviews
    all the time along with a mug of coffee.

  1. February 15, 2016 at 5:18 pm
  2. February 17, 2016 at 11:39 am

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