A Reformation of Capitalism?

A number of commentators have made the case that what we’re seeing now is similar to the Reformation in Europe. The similarities are there: the Catholic Church was a hierarchical control system dictating the social lives of the people of Europe. It had become corrupt and sclerotic, and benefitted only those within the system, while screwing everyone else. Eventually, someone said enough, an event happened, and a paradigm shift started to occur. Are we seeing the same shift in our fundamental secular religion – free-market economics?

Ran Prieur:

October 2. People are asking my thoughts on Occupy Wall Street. Here's an article about five ways OccupyWallStreet has succeeded. But notice the level on which it has succeeded: public opinion. In the middle ages, there was universal agreement that the church was corrupt for hundreds of years before the church began to reform. Even then it did not reform because of public opinion, but because it was losing to competing churches. Wall Street has no incentive to change, because it has a monopoly on our lives. We can't buy houses or go to college without bank loans; we can't drive without oil companies; we can't eat without agribusiness. Predictable assholes are saying we have no right to protest if we use products made by the systems we're protesting against. They're so wrong, they're almost right: the whole reason we're protesting is that we can't get what we need without going through corrupt systems; but until we have other ways of getting what we need, we have no leverage to do anything but shout into the wind.

John Robb independently has the exact same idea:

JOURNAL: A Capitalist Reformation?

Here is some thinking that you might find interesting. Remember, history rhymes but doesn't repeat.

Here's a simplification of the historical pattern of Reformation. Think of it in terms of the global Capitalist system:

•Universal system.
•Compliance and participation enforced by violence.
•Bureaucratic and lethargic. Corrupt and unfair. Hardship and misery.
•Loss of legitimacy.
•Challenged by reformers. Corruption exposed.
•New technology unleashes a cacophony of criticism.
•Reforms are rejected by the existing bureaucracy.
•New, competitive systems are launched.
•An exodus begins. People leave the old system to join the new.
•The old system fights back. It reforms itself.
•A fight ensues between the old and the new.
•Eventually a peace is achieved and a new era begins.

Note that a Reformation doesn't mean complete rejection of the current system. It means a rejection of the existing implementation/hierarchy/rules due to corruption, failure, and injustice.

http://globalguerrillas.typepad.com/globalguerrillas/2011/10/journal-a-capitalist-reformation.html

Earlier, Robb made an interesting comparison between the Chairman of the Federal Reserve and the Pope:

The Chairman of the Federal Reserve is part:

•Religious figure. The Pope of the Church of Capitalism. The leader of the Church. Final arbiter on the meaning of scripture (arcane economic indicators and economic papers). Is trained in ancient mysteries (economics). Has a council of Cardinals (the Fed board). He also issues indulgences (bailouts and free loans) to banks that he likes.

•Royalty. A king of Capitalism. Surrounded by the noble houses of Goldman, JP Morgan, US Bank, and Citibank. Is trotted out to "stabilize" and "orient" government action. Protector of the privileges of nobility (a national/perpetual first night). Be-suited in the garb of royalty. Sometimes (as above) deigns to speak to the assembly of commoners.

•Ideologue. General Secretary of the Capitalist Party. When he speaks, the party faithful in the markets listen. He ensures the purity of the ideology (Capitalism). Fights to expand the party's influence around the world. Has analysts devoted to watching/deciphering the actions of his Capitalist Politburo.

And finally, Treehugger made the exact same comparison:

At a time when the Tea Party, Occupy Movement and climate scientists and environmentalists are voicing impassioned, alarmed and radical ideas that point to the need for major changes to the current systems of power, I can't help but think of another man with radical ideas and how he sparked a movement.

On 31 October 1517, [Martin] Luther wrote to his bishop, Albert of Mainz, protesting the sale of indulgences. He enclosed in his letter a copy of his "Disputation of Martin Luther on the Power and Efficacy of Indulgences," which came to be known as The Ninety-Five Theses. ... "Why does the pope, whose wealth today is greater than the wealth of the richest Crassus, build the basilica of St. Peter with the money of poor believers rather than with his own money?"

Martin Luther probably never really nailed his Ninety-Five Theses to a church door (Thanks, Wikipedia!). But we don't need legendary drama to be inspired by what Luther did. While major change never happens without collective action, some of the great moments in history are simply a human presenting an alternative idea. Stepping outside of the norms of one's time and questioning if things really have to be this way sounds so easy, but deep down we all realize how difficult this can be. It's easier to go along, to think that things are just the way they are and there's nothing you can do about it.

I believe progress - on a long enough time line - is inevitable. Just as things evolve, albeit slowly, all around us, so to will humans continue to figure things out to make life better for all life. I like to think this, at least. I have my moments.

But on the time line of history, where we see the spikes of progress we also see the humans, leaders and movements that made it happen.

Martin Luther is the man we recognize today for putting to paper ideas about the Catholic Church and what it meant to believe that had probably passed through, in one way or the other, the minds of many other people of his time. To suggest that his actions were not wholly original is not to discount what he did. In fact, I think it makes what he did even more interesting. Consider how Luther's ideas rippled across Europe, again via Wikipedia:

It wasn't until January 1518 that friends of Luther translated the 95 Theses from Latin into German, printed, and widely copied, making the controversy one of the first in history to be aided by the printing press. Within two weeks, copies of the theses had spread throughout Germany; within two months throughout Europe.

When faced with a giant, entrenched systems, like the Catholic Church or Wall Street, Congress or a flawed global economic system, it's not difficult to spot things we disagree with or think are wrong, but few of us have the intelligence to understand the full context of a moment, as well as the desire or ability to pull together the right ideas in a way that sparks a movement of change.

Look again at Luther's line above questioning the economic injustice of the Catholic Church system of indulgences. With minor changes it could easily fit in with the Occupy Wall Street manifesto. I think that's an important point.

The reason Luther's respectful letter ended up being shared across Europe is because
enough people had concluded things weren't quite right with the existing system and the timing was just right for a movement to emerge.

Whether you look at the Reformation, the American abolitionist movements, the labor movements of the late 19th and early 20th centuries or the woman's suffrage or civil rights movements, all of these progressive change movements happened because of a combination of collective action, good timing and leaders that wove together the ideas and actions needed to enact the desired change.

http://www.treehugger.com/files/2011/10/martin-luther-steve-jobs-ecologizing-capitalism.php

Prior to either of these, I myself wrote in a comment on Decline of the Empire:

I’m always flabbergasted when people turn to their pet economic theory as a way to justify some outrage. Economics is a pseudoscience. Economists like Thoma et.al. flatter themselves to think they are dealing with any sort of true “science”.

It starts with a foregone conclusion – like the idea that so-called “free” markets, lack of regulations and globalization will make everyone better off - and then gathers evidence to support those conclusions. And isn’t it interesting how the forgone conclusions of economists always end up supporting the wealthy and powerful? In fact, its antecedent is medieval theology. References to sacred texts like The Bible and Aristotle were substituted for any type of empirical evidence, and anything that did not fit that world view (like a receding glacier or a dinosaur fossil) was discarded or explained away by tortured logic.

Many observers have compared the economics profession to the Catholic Church of the Middle Ages. In fact, their role is precisely the same – to provide a philosophical justification for a clearly dysfunctional and unjust social order. Rather than kingship by divine right, it attempts to justify to the masses things that are clearly absurd – like Americans competing against workers all over the world will make all of us more prosperous. Or that supply creates its own demand (Say’s law). Or that infinite growth is possible on a finite planet. Of course the conclusions of economists always support those who wield the money and power. Coincidence? The sole purpose of economics as it is practiced today is to come up with justifications for the status quo. Think about it – the “father of classical economics,” Adam Smith, did not attempt to come up with some sort of ideal, rational system, he merely described what was already happening. Then later, these observations became a “science.”

The conceits of modern economics come out of Enlightenment attempts to make social governance as “rational” as Newtonian physics. Two critical ideas underlie this - that individuals were atoms whose interactions were as precisely quantifiable as the effects of gravity on physical objects, and that the “laws” of economics were as immutable as Newton’s laws, such as F=MA. Never mind that every “law” of economics has been proven false (even supply and demand – have you looked at college prices lately), and that the money system is an entirely artificial creation, subject only to whatever rules we wish to apply. This has gotten even worse as what used to be called institutional economics was replaced with abstract mathematical models promoted by game theorists and think-tanks. With institutional economics, the effects of policy were implicitly an object of study. When the idea of the market as a perfectly rational, all-knowing machine that correctly allocates all resources became gospel, any questions about social effects were tossed out the window. Economics finally realized their Enlightenment goal. Too bad their “Market” seems to be identical to the Medieval Catholic Church’s notions of God – all-knowing, all-powerful, capricious, and most of all, never to be questioned under any circumstances. That why economists can no more explain financial crises than medieval monks could explain famines or the Black Death to the suffering populace.

The truth is, markets have always been driven not by scientific principles, but by greed and fear. Is there a quantifiable unit that measures greed (may I propose the “Blankfein” as such a unit).

Like the Catholic Church, modern economics does not tolerate dissent. Remember Galileo? If you look up heterodox economics you can see what happens to people and ideas that do not fit in the current economic free-market paradigm. Any apostates from this world view , no matter how intelligent and qualified, are dismissed entirely. In fact, the ultimate “heterodox” economist, Karl Marx, seems to have predicted exactly what is happening to capitalism, and a few more intelligent observers are starting to note that uncomfortable fact,.

As Adam Curtis so aptly put it in a recent blog post, mainstream economists and think-tanks are designed not to come up with solutions, but rather to limit our ideas to those that benefit the already powerful and preserve the status quo. Here is an eloquent statement from his blog:

“The guiding idea at the heart of today's political system is freedom of choice. The belief that if you apply the ideals of the free market to all sorts of areas in society, people will be liberated from the dead hand of government. The wants and desires of individuals then become the primary motor of society.”


“But this has led to a very peculiar paradox. In politics today we have no choice at all. Quite simply There Is No Alternative.”


“That was fine when the system was working well. But since 2008 there has been a rolling economic crisis, and the system increasingly seems unable to rescue itself. You would expect that in response to such a crisis new, alternative ideas would emerge. But this hasn't happened.”


“Nobody - not just from the left, but from anywhere - has come forward and tried to grab the public imagination with a vision of a different way to organize and manage society.”


“It's a bit odd - and I thought I would tell a number of stories about why we find it impossible to imagine any alternative. Why we have become so possessed by the ideology of our age that we cannot think outside it.”

We cannot think outside it. That brilliant quote sums up exactly where the intellectual life of Europe was during the domination of the Church. What are alternatives to the current system. We'll look at what's happening in Greece tomorrow.