Part III: Quo Vadis Capitalism
09/26/2001
|
|
|
|
|
|
SOCGRAD MINI-LECTURES
by
The recent behavior of the American stock market since 11 September together with the massive lay-offs of workers in shops, factories, airlines, hotels and financial institutions force one to consider the future of capital investment in the USA. Over a trillion dollars US has been removed from stocks of corporations listed on the New York Stock Exchange. Close to a million workers have been laid off these past two years...and more lay-offs to come.
It looks like capitalism, as an economic institution, is deserting America as a socio-political entity. There is nothing new in the flight of capital for safer, better haven. The history of capitalism has been one of periodic moves to new and more favorable centers for investment, innovation, accumulation and domination of local institutions; family, church and polity alike are greatly re-shaped and re-fitted to the political, production and ideological needs of private capital and unfettered markets.
Capitalism, as a profit-centered economic system began in earnest in Venice in the 11th Century and ended in the 14th century...wealth from all over Northern Europe and England flowed into Venice as local merchants provided ships, weapons, foods, clothing and lodging to the tens of thousands of peasants, yeomen and nobility who used Venice as a departure port for the Holy Land. Wealth accumulated and art flourished. But the holders of wealth were not, properly capitalists...they did not stimulate research, development, innovation nor did they expand production.
When the crusades ended, the center of global capitalism moved from Venice to Brussels. By the 12th century, commerce and handicrafts were flourishing in Brussels. Trade and industry benefited from charters of 1312 and 1356 by the dukes of Brabant. By the terms of the charters, imposition of taxes was strictly limited, and the people were given a voice in the government. Two of the basic features of the modern capitalist state emerged and were reproduced in other countries.
Capitalism moved next to London; King John gave London the right to govern itself and, with a world class port, send goods to the far ends of the world...and brought back spices, coffee, tea, silk and pottery from the Orient. But it was the opening of the Royal Exchange by Queen Elizabeth in 1566 which made England a world power. Shipping, Commericial and financial institutions expanded to make London the capital of global capitalism. But it was the development of industrial production which began in Huddersfield in the 18th century which added a key component to capitalism as an economic institution; the steam engine was adapted to factory production and machines greatly increased per worker productivity. Wage labor, free markets overseas and government by wealthy merchants and investors displaced the feudal system in England and served as a model for the writers of the Constitution in North America.
By the 19th century, New York replaced London as the center of global capitalism...unecumbered by royalty and royal tax collectors after the Revolution, American factories, ships and investors slowly took overseas markets in Asia, South America and the South seas.
Japan became the center of capitalism in the 20th century as it produced better goods with cheaper labor and undersold American producers of autos, tools, electronics and other key markets.
The movement of capitalism from the USA is driven both by the 'hostile' features of production and investment at home as well as the 'attractive' features of investment abroad.
Pollutions laws, labor laws, capital gains taxes and product safety laws all create a 'hostile' enviroment for profit-driven investment. The bombing of the World Trade Center and the Pentagon has discredited the USA as a safe haven for investment by drug lords in South America, Oil Sheiks in Arab countries, corrupt politicians all over the world and fund managers in the USA.
Friendly governments in the third world offer cheap labor, tax havens, easy pollution outlets, public funded factories, roads, energy and communications. And ready access to US Military forces to maintain the social peace needed for high-profit production and investment.
It is an open question where world financial and industrial capital will be centered in the 21st century; I have four candidates China with its totalitarian and market oriented government can supply cheap labor, industrial peace, subsidized infra-structure and world class ports. India also offers favorable investment opportunity with a hugh supply of educated workers and a driving need for capital investment. Brazil, Russia or perchance Argentina could very well emerge as the leading capitalist state in the future. South Africa, Nigeria or Egypt seem unlikely; too much social conflict, far less education and few internal resources for subsidy.
There is no room for high profit, low cost production in Europe, North America, Australia, New Zealand or Japan...the super-exploitation of workers; despoilation of environment; curtailment of civil rights; transfer of costs to the public purse is, in the 21st century far too difficult even with conservative control of the law making and law enforcing apparatus.
So, where will capital investment go in the future? When will investors desert North America in force? A few more dramatic terrorist acts; a bit more intrusion of the state into financial activity; a heavier tax burden as costs for security expand; slow erosion of programs of social justice---all these will drive capital away...and answer the second question above.
As far as the best place for high-profit, low-cost, safe investment; I favor China at this point. If it offers enough free market dynamics; if it offers enough state security; if it offers enough cheap labor; if it permits the transfer of profits back to European and North American investors; if it improves both research and development, it may just be the next world super power...in financial terms.