[Dr House]

https://fee.org/articles/risk-reward-an ... apitalism/

If pop culture is a leading indicator of social change, one emerging TV genre should be applauded. It is a flood of reality shows that focus on the daily dynamics by which self-made people conduct business: Pawn Stars, Ice Road Truckers, American Pickers, Deadliest Catch, Hardcore Pawn, Yukon Gold, Storage Wars, and others.

I call it “reality capitalism,” and it is the polar opposite of crony capitalism.

They display people taking risks and prospering (or not) through hard work and good judgment. They embody the opposite of cronyism because government privilege is nowhere to be seen.

Some aspects of the programs feel contrived, but what matters is that small businessmen and working people are elevated to a status that used to be reserved for those featured on Lifestyles of the Rich and Famous.

Fans tune in to see whether Mike and Frank (American Pickers) will find a “honey hole” as they travel America. Perhaps a barn in Rhode Island will contain a rare Harley or one of the old metal gasoline signs that sells in a flash in their Iowa shop. Viewers groan in amused exasperation as Rick (Pawn Stars) flaunts arcane facts about the antiques people bring in. The items and negotiation are fascinating, and the businessmen are thoroughly likable because of the honesty, humor, and respect with which they treat sellers.

The shows also explain the simple mechanisms of the free market. Mike and Frank discuss the end-price they will put on items and tell the seller why they need to buy at approximately 50% of that figure. The words “gas money” come up frequently. Rick's favorite phrase is, “I'm taking all the risk.” Then he comments on overhead and how long an item might take up room in his store. In both programs, the buyer sometimes pays more than the asking price because he knows the true value of a good and does not want to cheat the seller. The fairness is not only a matter of ethics but also good business: it establishes trust.

The reality capitalism genre can be roughly broken into two categories: entrepreneurs who are business owners, and working people who struggle to prosper against the odds.

Yukon Gold features small mining crews who search for gold in the Yukon during its four-month window of opportunity. Machinery breaks, nature strikes, and crew members fight against their own discouragement. Ice Road Truckers follows truck drivers who confront frozen lakes and treacherous situations as they haul loads across Arctic areas of Alaska and Canada. Both shows focus on why the people assume work in such terrible conditions: money. Most of them are after a better life for their families.

They are entrepreneurs who gamble with their own time, money, and energy to establish businesses through which everyone profits. They are people who overcome obstacles for a chance for their families to prosper. It is heartening to see society’s true heroes receive the acknowledgement they deserve.

[Saeko]

If a similar show was made about what the top .01% do, there'd be a revolution tomorrow.

[quetzalcoatl]

The "reality" is that capitalism inevitably will evolve into crony capitalism. This is in the nature of competitive advantage and can't be effectively guarded against.

Consider the role of limited-liability corporations in the US during the late eighteenth and early nineteenth centuries. Corporation charters were limited in duration and scope. They were not allowed to engage in activities not directly related to their charter. They could only own property directly related to this charter. They were not allowed to contribute money to charity, nor were they allowed to lobby or contribute money to candidates - these were considered violations of fiduciary responsibility. The founders had terrible experiences with early mercantilist companies, and wished to suppress their formation.

However, the development of industrial capitalism in the nineteenth century enabled corporations to gradually assume greater powers. They actively contributed to the growth of government centralized power, in order to gain competitive advantage over their rivals. This is a ratchet process; i.e., a process that cannot be reversed (at least not by normal electoral means). The idea that one can reverse cronyism by reducing the power of government is essentially a phantom. What ends up getting eliminated are restrictions on corporations and social safety nets, while the levers that allow corporate hegemony remain in place. So, for example, state legislatures are beginning to require homeowners with solar power to pay a penalty, because they are 'freeriders' on the grid. NC is restricting large swaths of land from building wind farms. Opponents of fracking are labelled as terrorists.

Corporations today are meta persons. They can be immortal and transcend nationality. At high levels they wield extraordinary political power and hold a veto over national economic policy.

Libertarians are asking us to depend on state and national legislators to perform the operations that would reduce the powers of centralized government. This is simply suicide. The same legislators that engineered the deep state, and who are essentially its employees, will take this 'mandate' and transform the state into an even more powerful instrument of the oligarchy.

(This analysis does not apply to small businesses without connections, nor to privateers who engage in the speculative ventures described in the OP)

[Saeko]

Libertarians are asking us to depend on state and national legislators to perform the operations that would reduce the powers of centralized government. This is simply suicide. The same legislators that engineered the deep state, and who are essentially its employees, will take this 'mandate' and transform the state into an even more powerful instrument of the oligarchy.

(This analysis does not apply to small businesses without connections, nor to privateers who engage in the speculative ventures described in the OP)

And furthermore asking people to give up the welfare state and labor protections in a "crony capitalist" system is just fucking stupid no matter how you look at it.

[SueDeNîmes]

When I hear Libertarians maundering about "crony" capitalism, I wonder what non-crony capitalism could look like. Deep sea trawling, hazardous long-haul driving and panning for gold in the Yukon, apparently. Except, presumably, without any mandatory safety protections. Well, thanks but no thanks, crony capitalism suddenly doesn't sound so bad.

[TheRedBaron]

Dr House: If pop culture is a leading indicator of social change, one emerging TV genre should be applauded. It is a flood of reality shows that focus on the daily dynamics by which self-made people conduct business: Pawn Stars, Ice Road Truckers, American Pickers, Deadliest Catch, Hardcore Pawn, Yukon Gold, Storage Wars, and others.

And this is just the tip of the ice berg. Storage Wars plays on all continents. The contents of abandoned storage lockers are auctioned. Most of these goods are hidden in boxes or bags, and the buyers are eccentrics, which is all very exciting and perhaps staged just to entertain the viewers. The British BBC focuses on the auctions of antiques: Flog it!, The antiques road show, and Bargain hunt. In essence this business is a straightforward exchange. The traders are buyers of end products, and thus consumers. The shows illustrate how prices are formed by means of supply and demand. It also shows that selling goods at auctions will not make their owner rich.

Dr House: Some aspects of the programs feel contrived, but what matters is that small businessmen and working people are elevated to a status that used to be reserved for those featured on Lifestyles of the Rich and Famous.

Yes, the programs depict honourable ways to earn your money. But to be fair, they have some resemblance to the traditional rag-and-bone man or scrap dealer. Incidentally, it reminds of a joke. A man goes to his bank manager and asks: "I would like to start a small business. How do I go about it?" The bank manager replies: "Simple. Buy a big one and wait".

[Rich]

What in God's name is Capitalism when its at home? What are its defining features? When did it begin in Britain? Do you need to have privatised fire services like Rome to be Capitalist? Does state provided fire services make you socialist? Are state provided fire services an example of crony capitalism? Does the Islamic State count as Capitalist? Would the Nazi regime in its dying days count as Capitalist?

Marxist Theologians seem to believe that in Europe Capitalism succeeded Feudalism succeeded Slave societies. Yet slaves only made up may be 8% of the Roman empires population, so describing them as a slave based economy is ludicrous as slaves were bound to be less productive than wage labour and the self employed on average. But even worse Feudalism was a less complex society than the economy and society of the Roman Empire that it replaced.

Would anti capitalists be happy to go back to so called feudalism or the so called slave society of Rome, or are they just drivel merchants who never bother to analyse the slogans that they mouth off?

[MeMe]

Dr House: They display people taking risks and prospering (or not) through hard work and good judgment. They embody the opposite of cronyism because government privilege is nowhere to be seen.

Personally I am not certain what crony capitalism actually means. For instance, the economist Greg Mankiw calls that the Asian economies like Thailand, South Korea and Indonesia crony capitalists, because they have partnerships between government and private enterprises. He believes that the Asia financial crisis in 1998 proves the inferiority of this system. But I think that these states still have impressive growth rates.

In any case, markets can only function as long as the state creates the right conditions. Oviously an appropriate legislation is vital. But also infrastructure and a level playing field are indispensable.

In fact the examples of "reality capitalism" that you mention are a bit simple. It is mainly the trade in scarce resources, and not the invention, development and production of goods. According to the economist J.A. Schumpeter innovation is crucial for capitalism. It implies the creative destruction of capital, because innovations often make the existing production facilities obsolete. The old capital is crowded out by the new capital.

Sometimes the industry can not bear the risks of research and development. Certainly the state must finance education and basic research in the universities (technology push). In addition the state as a consumer can generate some demand pull. Innovations may be more profitable for the society as a whole than for the private enterprise. So this may justify to subsidize certain product developments.

The Italian economist M. Mazzucato believes that the state is quite skilled in picking winners. However the state is less energetic in breaking off the support for apparent losers. The state keeps throwing the helve after the hatchet. He is wary of a quick deprecation of sunk costs.

Personally, I think that the state must use the tax money to further the common good. This does not include speculative investment in innovations.

quetzalcoatl: The founders had terrible experiences with early mercantilist companies, and wished to suppress their formation.

In this respect the book "Why nations fail" by Acemoglu and Robinson provides interesting ideas. The authors state that the economy and the state must both be inclusive. That is to say, everybody can participate in the economy and in politics. Such a system will stimulate the people to engage in innovative actions, because it is profitable for them.

quetzalcoatl: Corporations today are meta persons. They can be immortal and transcend nationality.

No, corporations are never immortal. Even the largest ones come and go.

[quetzalcoatl]

Would anti capitalists be happy to go back to so called feudalism or the so called slave society of Rome, or are they just drivel merchants who never bother to analyse the slogans that they mouth off?

Capitalism is not an -ism, nor does it have any intrinsic defining features. Its features are specific to its culture and period. The main defining feature of capitalism is mutability. Capitalism is a term of art, and should always be used in a descriptive rather than a normative fashion.

This distinguishes capitalism from Austrian economics (or libertarianism, neolliberalism, etc.) which attempt to graft an intellectual agenda on to capitalism. This effort has succeeded, but it should be observed that this is an adaptive response to an external challenge - it is not intrinsic to capitalism (the described social phenomenon).

The semi-good news is that capitalism is subject to other forces as well. If you are able to organize a sufficient number of people with an attractive and coherent platform, you can direct its continuing evolution in the same fashion as the regressives have been doing for decades.

This may or may not have a chance of working, but what will definitely not work is waiting for a historic juncture to insert a proletarian revolution.

Economic/social/political changes are organic. Whatever the future holds, it will evolve out of the system we have at hand - not replace it. Social systems (of which 'capitalism' is a part) are complex adaptive systems - it is insanely difficult to fashion such a system out of whole cloth.

[TheRedBaron]

@ Dr House

It is a flood of reality shows that focus on the daily dynamics by which self-made people conduct business: Pawn Stars, Ice Road Truckers, American Pickers, Deadliest Catch, Hardcore Pawn, Yukon Gold, Storage Wars, and others.

A man gazed over a lake, which was completely frozen. An economist passed by, and said: "You will never catch any fish this way. Jump on my ice boat and we will go trawling". Another joke: if you rearrange the letters in "economics", you get "comic nose".

@ MeMe

According to the economist J.A. Schumpeter innovation is crucial for capitalism.

That is true. Moreover, the innovations come in waves, and thus they create the business cycles. Capitalism is a regular sequence of booms and busts. For this reason Keynes has advocated the active state, which aims to stabilize the level of investment. The state must reduce its investments during prosperity, so that the economy does not overheat. And it must raise its investments during the recession, in order to maintain the employment. This policy is just a phasing of the regular public investments, and across the whole cycle the budget remains balanced. You may call this crony capitalism, but actually it is plain common sense.

[MeMe]

@ TheRedBaron
You are not funny, Red Baron.

This policy is just a phasing of the regular public investments, and across the whole cycle the budget remains balanced

Although the gross national product varies naturally with time, I do not know if regular business cycles really exist. The cause of the economic fluctuations is highly controversial, and therefore also the desirability of state intervention. Some argue that free markets are essentially in equilibrium, and that deviations are caused by external shocks, like a poor harvest. However, others believe that the cycles are innate to capitalism. Economic models show that for a fixed technology and a fixed propensity to save the economic output may oscillate, or it may shrink or explode. The Polish economist Michal Kalecki has studied such phenomena in detail. According to other models, capitalism has a natural tendency to over-invest, which pushes the prosperity into a crisis. These mechanisms are all related to production. Besides, there are the financial crises, related to the monetary and financial system.

Personally, I guess that the fluctuations of the real economic system are a combination of all those destabilizing factors. This means that it is impossible to predict the development of rises and falls. The state may believe that the economy is in a temporary recession, whereas in reality there is a structural wane of growth. This is exactly what happened in the seventies of the previous century. In such a case the deficit spending of Keynes will deteriorate the situation, because it increases the public debt.

Therefore I think that the state must restrain deficit spending. In case of a prolonged recession the state must balance his budget. In such situations there seems to be no alternative to austerity. In other words, austerity is simply an adaptation of the expenses to reality. If crony capitalism is the artificial inflation of the economy by the state, then I oppose it.

[Potemkin]

According to the economist J.A. Schumpeter innovation is crucial for capitalism.

I agree; in fact, I would go further and say that capitalism requires innovation even if that innovation is fake. The safety razor is a good example of what I mean by 'fake innovation'. The safety razor achieved technical perfection just a few decades after being invented. The 'lather catcher' safety razors manufactured by GEM and Ever-Ready in New York in the 1900s and 1910s were and are the best safety razors ever manufactured. The surviving examples command high prices on eBay for this reason. Once this technical perfection had been achieved, where could capitalism go from there? It could only continue the business cycle for the safety razor market by pretending to innovate. Nowadays, safety razors tend to be plastic monstrosities with four or even five blades in an expensive replaceable cartridge. Some of them even vibrate nowadays, an 'innovation' which does nothing to give you a closer shave. Each new phony 'innovation' is loudly trumpeted in the mass media marketing campaigns, to encourage the consumers to dash out and buy the latest and 'best' safety razor. The revenues continue to pour in, and the safety razor manufacturers continue to survive. Personally, I shave with an Ever-Ready 1907 'lather catcher' safety razor, which was manufactured some time between 1907 and 1912. It's made of nickel-plated brass, so it's still as pristine as the day it came out of the factory. My only expense is buying single-edge razor blades, which cost a few pennies each and last for six or seven shaves each. And I get far closer and smoother shaves from it than I ever got in the days when I fell for the marketing 'innovations' hype and used a modern safety razor.