Capital for the Twenty-first Century
by David A. Ross
In light of the current economic crisis, the terms ‘capital’ and ‘capitalism’ are circulated in the everyday vernacular with ever increasing frequency and possibly less relevancy than at any time within the memory of those alive today. By definition, capital is a surplus of money (or commodities) used to generate more money (or commodities). The idea itself is somewhat suspect, if you stop to think about it. Indeed, how can money itself, which is actually a symbolic representation of credit that we all use to acquire the commodities we need, generate more money to buy more commodities (or the products made from them)? Or how can an abundance of aluminum or oil ultimately generate more aluminum or oil? Commodities are, by nature, finite, which is what gives them value in the first place. No amount of money can generate a single drop of oil once the world’s oil reserves are totally depleted.
The fact is that capitalism, by its very nature, devalues money. While commodities cannot be regenerated, money – at least fiat money – can be endlessly created without pause or conscience. The devaluation of money (inflation, i.e. the amount of money in circulation at any given time) is offset by higher prices (though not always by higher wages). In today’s world economy, we see finance ministers and national leaders attempting to create capital out of thin air simply by printing vast amounts of fiat currency, which is not only unsustainable, but is indicative of a truly bankrupt and unworkable system.
Yet even in a bankrupt system such as I describe, each of us continues to do what he must to procure the goods and services he deems necessary and advantageous in his life. It is seldom acknowledged by leaders, or by the general populace, that the Emperor is in fact wearing no clothes; nor is it ever postulated (perish the very thought!) that there might well be an entirely different way of looking at capital itself.
In physics there is a well-accepted law that every action demands an equal and opposite reaction. It is called Newton’s Law. During most of the twentieth century an ideological war was waged between capitalism and communism. More accurately, and more practically, that conflict illuminated the differences of a free market as opposed to collectivism. We all know by now which side prevailed. Communism, and its humane little brother Socialism, certainly had an extended test run, and those systems largely failed – not because they were unworkable in principle, but due to massive corruption and greed within the leadership. Today, capitalism is under the same gun, so to speak. Greed and corruption are rampant not only within government itself, but also within the independent systems that support it. While this might seem obvious to even the most passively interested person, a less obvious notion comes to mind, that being how easily we become our adversaries when convenient. It is seldom talked about, and even less often contemplated, that perhaps it is the objective itself of each system that ensures its eventual collapse, because when money is the ultimate objective of political systems and the cultures they represent, then such debasement seems all but fated, whatever name it embraces, or whichever flag serves as its banner.
But what if we were to redefine capital itself? What if suddenly neither money nor commodities represented ‘wealth’ but something far less tangible? What if it were commonly accepted that ideas – not money or commodities – were the ‘real’ and most valuable capital? Might such a notion actually fulfill Newton’s Law, not in terms of physics, but in terms of social evolution?
At this point in our natural and cultural evolution, it seems that the pendulum of public perception is already well advanced in its inexorable (and inevitable) journey of balance. Capitalism, for all that it is and all it is not, is basically Darwinian in nature. Those with capital invest it to make even more capital, while those without means to invest provide the labor involved in production as well as the market to which those products are sold. But as we have recently seen, neither the labor force nor the market is necessarily stable. The idea of future security for present sacrifice is called seriously into question as both savings and social systems disintegrate. It would appear to the casual observer, whether he is financially invested or not, that this so-called meltdown is not only sudden and unexpected, but also correctable. What is not readily evident is that the underlying social belief in saving and investing for a secure future might itself have lost credence. If it were not so, why is there now a negative savings rate in the United States, which is of course the very bastion of capitalism? In fact, the media is now rife with pundits with serious credibility portending a currency crash and even an end to the world’s reserve currency, the almighty U.S. dollar!
Without any doubt, the financial structures that have defined world commerce for the past century are under serious scrutiny and also under serious pressure. And whether or not the populace of the hierarchical economic entities (the rich Western governments) knows it or not, they are already in the process of rethinking the entire system. Inevitably those with something to lose (the successful capitalists) will do all they can to prop up and maintain the status quo – even to the point of devaluing the currency they identify as wealth – while those with very little to lose (the lower 95% of the economic spectrum in America and a lesser percentage in other Western democracies) will ultimately gravitate to a new kind of currency – one which they can acquire and exchange in a realm adjacent to the system of trade now in place. What currency might that be? Perhaps it is one far less measurable and far less tangible – the currency of ideas!
For much of civilization’s history, the barter system was the model of exchange: textiles for food; precious jewels for privilege; twenty-five camels for one bride. Then money came into existence to simplify trade. Except money was coined by royalty, the elite of the society. Still, in order to facilitate necessary commerce, the elite granted bits of money to virtually all members of society, albeit in highly controlled apportionments. Because money – or more rightly what it could be used to acquire – meant power, and power has always held its own particular allure. For centuries now, this particular variety of commerce has been well defined, and as such, members of society have come to define the exchange of money for goods and services as commerce itself. But is that really the bigger picture? To be honest, goods and services are not the only articles of value that have been traded throughout history. For instance, labor has been traditionally traded for sustenance; expertise and organizational skills are also highly valued. And in fact, it is often inspiration, whether in technology or art or even business, that is most highly valued. Aside from simple labor, this is the commerce of ideas.
So, can one buy a new car or year’s worth of groceries for one – or perhaps two – good ideas? In certain circumstances the answer is yes, but only after those ideas have been turned into money. But what happens when the scales of customary exchange have become so out of balance that the ideas themselves take on greater relevancy than the traditional currency? For most, such a circumstance is hard to imagine, yet examples persist, right in our midst. Consider the current situation in Zimbabwe: in that once strong but now degraded economy it might serve one better to have a novel approach to survival rather than an ample supply of worthless paper. Throughout history, similar situations have plagued other countries that have chosen to inflate their currencies, the former Yugoslavia coming immediately to mind, not to mention the Weimar Republic in pre-war Germany. So the concept of a worthless currency is not unfounded; the notion of what takes its place is another matter.
In the past, when currencies have failed the simple answer for governments has been to mint a new one, and as long as the public was willing to accept the new money, the failed system was reborn and the power elite remained secure (and rich). In modern times any number of countries have undergone such a transition, and while particular leaders may have fallen out of favor (or even lost their lives), the system on whole has remained in tact and largely unchanged. It must be noted, however, that these individual crises have always occurred in relative isolation; today nearly all the world’s currencies are more or less interconnected, and it begs the question (as we are now painfully aware), what happens when the dominoes begin to fall? If we are no longer able to trade dollars, or euros, or yen to buy the commodities we need, what will we trade in their place? Can we imagine a time and circumstance where ingenuity is more valuable than traditional money? The answer to that question is yes, we can. And we must!
While the idea of trading ideas is certainly not new, the means available today to do so is more accessible than ever before. Technology (the application of science) has provided virtually every person on earth the capability of instant communication with anyone else. This capability has of course developed in stages, beginning with a viable world postal system, which was enhanced by telegraph, then radio, then television and telephone, and finally the Internet. And while each medium has contributed significantly to global awareness, it is the Internet – and particularly the proliferation of social media – that already has had, and will continue to have to an even greater extent – the biggest impact on person-to-person communication. As a result of this rather sudden and prolific exchange of ideas, the seeds of a new and vibrant populist movement have been sewn, and short of shutting down the medium itself (which is unlikely considering how many official functions – governmental and otherwise – now rely on it to conduct everyday business), one can imagine little to impede this movement. But the most interesting aspect of this trend is not necessarily its popularity, but rather the direction it seems to be taking: ideas are its vital commerce; money, while still in evidence, is decidedly secondary.
Of course populism might well be traditional capitalism’s worst nightmare. Too many chiefs and not enough Indians. Capitalism, by its very nature, needs Indians – lots of Indians. The chiefs are the financiers, while the tribe dances round the fire and prepares for battle against the neighboring chief. Conquest is one of capitalism’s fundamental aims (hegemony in the case of modern nation-states), because without conquest (of land or resources, both of which are finite and neither of which are renewable) it is impossible to generate more capital. And let’s not forget that, in the capitalist model of economy, capital is always necessary to create more capital. Yet, if the warriors lose faith in the chief (and ultimately fail to dance, i.e. engage in conquest) then the chiefs become less and less powerful, and the system on whole will fail. This is precisely what happens in a populist movement, and a new model of society (and commerce) eventually emerges. The pendulum swings in its equal and opposite reaction to the current capitalist model.
The greater question at hand is not ‘if’ this movement is underway (for it obviously is in play), or how long the transition might take to manifest (the speed of communication within the virtual world suggests a very rapid metamorphosis), but exactly what form a ‘new model’ society (as well as its system of trade and commerce) might take. Certainly capitalism has not only created many of the current and fundamental problems (insolvency, global warming, enforced poverty, perpetual war, religious strife, border disputes, cultural corruption, infanticide, a vastly unequal distribution of wealth and/or opportunity, unnecessary disease and/or unavailable health care) but it perpetuates them in order to facilitate wealth growth for the elite. Customarily such practices have been whitewashed, if not hidden altogether, with tactics such as propaganda, double-speak, media manipulation, and outright abuse (torture). Yet, as the means to communicate person-to-person becomes easier, that veil of secrecy and deception is less and less viable. People are talking, exchanging ideas – not always civilly, but certainly enthusiastically. It is the twenty-first century, and humanity is actively cultivating a new modus operandi, a new way of seeing one another and the world as a whole. The Indians have grown tired of the battle, they are disgusted with environmental degradation, they are outraged at being co-opted time and again, and most of all they are tired of being lowly Indians. In short, what is really needed is a new system of commerce propelled by a new and very different kind of currency – the currency of the twenty-first century, the currency of ideas! And the people’s medium – located in the alternate universe of cyberspace – is buzzing like a beehive in mid-summer.
Without a doubt, the tangible world is sitting on the cusp of a dramatic realignment – the type that happens only every five or ten generations. Even as the US dollar loses steam and comes into question as the world’s reserve currency, viable economies are emerging in parts of the world previously ignored as also-rans. Brazil, for example, is now the ninth largest economy in the world, even as they, as well as other South American countries try their grand experiment with socialism. South Korea has become an economic powerhouse, while India vies for the title of high tech Master of the Planet. Hard cash has begun a precipitous migration east, winging its way toward Asia like a flock of migratory birds flying south after feeling the first frost of winter (a full 87% of all cash reserves on earth now resides in Asian banks). Meanwhile, Dubai, Abu Dabi and Qatar each have become world-class cities in their own rite, rivaling even New York, London and Paris in prestige and, more importantly, commerce. Russia, Mexico and Venezuela all sit on tremendous reserves of natural resources, and even a few countries on the so-called Dark Continent of Africa have come into their own on the world stage. South Africa has been a First World player for decades. Namibia and Angola are huge economic success stories. Egypt is a major power politically, and even Libya has quit antagonizing the so-called free world in hopes of sharing a piece of the New World Order’s pie. Iran is about to join the nuclear family.
Then there’s China… Within twenty years, China will support the largest middle class on earth and provide most of the rest of the world with the manufactured goods it consumes. No nation will even approach its dominance in manufacturing and trade, and in all likelihood its currency will replace the dollar as the world’s reserve currency. The average Chinese worker will enjoy many of the lifestyle comforts that once existed in North America and Europe – that is, if he doesn’t choke on the industrial air pollution created by the factory in which he toils.
Which leaves us with a list of the once rich and powerful western giants: the United States, Britain, Germany and France… What is to become of these so-called Super Powers? How might they attempt to maintain their current status as economic and social tides turn eastward? We already see that military dominance is one tactic, while the (blackmailing) threat of default on massive debt is another. Will it work? Probably not: there just aren’t enough bullets to kill this beast. When all is said and done, resources will determine the super powers of the next millennium (provided we don’t drown in our rising oceans, or melt from the rising temperatures caused by ecological degradation).
Whatever happens during the next hundred years or so in the so-called tangible world, the global populist movement described earlier will continue to grow and flourish in a separate but equal universe. At some point, the old models of capital (and even currency itself) may begin to sound antiquated, useless, and downright silly. What is inevitable in this movement is an end to the so-called ‘Me’ generation, and a subsequent exodus to the ‘Us’ era. Ecological stresses (500 species are currently becoming extinct each and every day) will demand cooperation rather than competition, and our very survival, as a species, will depend upon a more egalitarian world culture. All this will also require a type of ingenuity that will stretch the very boundaries of human endeavor. Will we face the coming of another Dark Age (if not species extinction), or will we experience a renaissance? Whatever the new paradigm will be for the twenty-first century, the new capital (or currency) will certainly be IDEAS!