A tale of two capitalisms

It was the spring of hope, it was the winter of despair.

I lived part of my life in a deeply communist country. I spent my youth in a country trying to raise itself from this darkness. So I know the dangers of socialism better than many people, certainly better than most people posting on the internet in English.

But over the recent years, since moving to UK, I have also seen some of the worst excesses of unbridled capitalism. It’s not quite Dickensian levels yet, thankfully, but we’re getting there. Things are not going in the right direction at all.

So you could say life put me in a good position to discuss the merits of the two. And, to be sure, I come out in favour of capitalism. But not the capitalism we know and loath today in the UK and the US.

Because there are two versions of this economic system, and I would like to believe one can exist without another.

First, a bit of a context:

This is the first kind of capitalism. The capitalism of corporations, of people treating life as a video game, and money as points confirming their personal value. The system made for, and by, people who have long ago lost the meaning of what life is all about; the only thing that matters are abstract numbers that would satisfy the shareholders. The system based on, and fueled by, nothing else but unadulterated greed.

Nobody needs that kind of capitalism. Neither we, the average Joes, neither them, the super-rich. They don’t need that kind of money for anything. We don’t need the income inequality it generates, ridding us of ability to live happy lives.

This is the other kind of capitalism:

The capitalism of a local market, of a small producer, of enthusiasm, of passion, of desire to do good things and serve your customers. This is where capitalism shines: it provides the means and the motivation to strive for the best. You couldn’t find this kind of thing in a socialist economy; not on a large scale. Sure, there were individuals who fought against the tide, but they were few and far between. Only under capitalism can such projects really grow.

Don’t get me wrong, I don’t mean to say global economy is supposed to get by on local farmers markets alone. Big companies are necessary. Corporations are necessary. Hell, I work for one, rather than planting biodynamic veg with my own hands. I use products made by corporations. It would be the height of hypocrisy to rail against all corporations, everywhere.

What I mean to show with these examples are two mindsets; a mindset that should be rewarded, and a mindset which should be scorned and shunned. In the world today, these seem to be reversed. Can we afford to have one capitalism without the other? Are the two forever intertwined?

I have no easy answers. This is just whimsy, wishful-thinking. I haven’t studied economy, and I’m not a politician. But I’d like to think something can be done about it. Like many people with similar world view, I look with hope towards the Nordic countries, with their Scandinavian model. Would it work everywhere? How to deal with its inherent flaws (because every model has flaws)? I don’t know. But something needs to be done.

Soviet-style Socialism was based on (massive generalization alert) accumulation of power, but it had no in-built defenses against the power-hungry; and it was hunger for power that ultimately brought it down. Capitalism, based as it is on accumulation of capital, has no in-built defenses against the greed. For the sake of the masses of good, hard-working capitalists, I would hate to see it brought down by the greedy few.

Who loses on counterfeit?

Main shopping street in Shanghai. ‘Many, many watch.’

There seems to be a common consensus in the IP debate that while legality and morality of copying of intangibles is a matter of discussion, producing physical counterfeit goods is uniformly immoral, illegal and hurtful to the economy.
As with the digital content ‘piracy’, huge numbers are bandied about by corporations, billions of dollars of ‘loss’, not only to them, but to the society as a whole. It seems common sense that counterfeit is bad, and for example the parts of ACTA (Anti-Counterfeit-Trade Agreement) that deal with physical piracy are not really seen as the problematic ones at all. Economic experts in media claim without a blink that without such trade agreements no viable economy is possible. Counterfeit is a terrible crime, plain and simple.

A very few people (outside China) – like Janusz Palikot in Poland – even dare to mention the need to discuss this status quo. But as usual, things are not as simple.

First, let’s set apart that which really is hurtful: the dishonest ones, or scams, where a buyer is not aware of the counterfeit, or the consequences of buying one. There is real harm in that, especially if it’s food or medicine. But we have laws against scams and dishonest trading which can be used in these circumstances, without even mentioning the terms Intellectual Property or infringing on personal freedoms. A cheater is a cheater, whether he sells you fake banknotes or fake Viagra(R).

Once we leave those out, we are left with counterfeits which are bought willingly. Because you like the design. Because you want to brag about the logo. Because you don’t really care about any of that, but your last sunglasses broke and the only ones the guy at the beach is selling are ones with a tacky ‘Emporio Armanix’ logo glued to the frame.

I don’t know the numbers, but I’d venture a guess that most counterfeit trade in the world is not a result of scams but this second type. If you buy a ‘Rolex’ watch off a guy in the street for $200, you are either fully aware it’s a fake, a stolen watch, or are too dumb to know any better. In any of these cases, you would never buy a real Rolex instead. Counting this purchase as a loss by Rolex is exactly the same fallacy the media concerns use to count all pirated mp3s as lost CD sales. It assumes people are less vain than they are greedy. It assumes people who buy counterfeits knowingly would otherwise spend their money on the real products if they had no choice – and, conversely, people who want to buy luxury goods don’t care about their provenience as long as the logo matches.

This is an obviously absurd assumption, easily debunked by real numbers. If economy worked like that, luxury companies would all be counterfeited out of the market and into bankruptcy. I don’t hear that happening. In fact, sale of luxury goods rose dramatically over the years, defying any economic indicators. People know what they’re buying. If somebody has $10,000 to spend on a watch, they will spend buy one $10,000 watch from a real dealer, not 50 $200 watches from a guy in a dark alley.

Just like the movie business is experiencing an unprecedented growth despite (some would say because of) ‘rampaging piracy’, the luxury and designer brand business thrives regardless of how many ‘Genuine Armani’ jeans are being sold on the bazaars of the world. All that counterfeiting really does is raising brand awareness among people who would otherwise sometimes never even know about a brand, breeding future customers who, when they are rich enough, will buy the genuine article.
How is that a bad thing?

A wikipedia article claims that Counterfeiting in China is so deep rooted that when shops selling counterfeit merchandise were shut down by authorities, the owners protested publicly against this action, holding weekly public protests, and mocking those attempting to prevent counterfeiting as ‘bourgeois puppets of foreigners.'”
Good for them, I say.

The Healthy Economy

I will start off the year like I’ve started this blog – by bashing the economists 🙂

So Forbes had just declared that the four healthiest economies in the last year were the BRIC countries: Brasil, Russia, India and China. Their reasoning? The four nations have best economical growth and no mounting foreign debt.

Even the Forbes’s Ken Rapoza admits the countries have a fair share of ‘some problems’ – rampant corruption, abject poverty for millions, income inequality, lack of democracy. But he shrugs it all off in a matter of a single sentence. All this must bow before the God of Growth. Nothing matters as long as the economy is ‘healthy’.

This is a very curious understanding of the term. These economies grow so fast because they have the room to grow, having started from, in most cases, rock bottom. If medicine worked that way, the ‘healthiest’ man in the hospital would be the one who’s recovering from the most debilitating illness, not the one who had just singed out, but caught a minor cold in the process. In relative terms, the latter’s health is decreasing, and the former’s is on the up, but which one of the two would we rather be? Which country would we rather live in – Norway or China?

Rapoza oozes loathing towards any sort of ideology mixing and even overruling pure economy. “The biggest political battles in the BRICs are over corruption charges, and where to invest oil wealth,’ he says, ‘meanwhile, in the U.S. and Europe, the biggest political battle is how to bailout southern Europe, or about cutting government programs for ideological rather than economic principles.” 
Bah, the ideological principles! Who needs them when you have the oil profits and an endless resource of slave-waged labour? 

I’m sure the inhabitants of Rio’s favelas and India’s rat-catchers agree whole-heartedly.

How glad they must be to live in the world’s healthiest economies!