Can You Fake....a Capitalism?

 

We don't have a precise read on why this slower pace of growth is persisting. Ben Bernanke

Fed Chairman Ben Bernanke is confused.  Interest rates are low, liquidity is flowing freely and equity prices are up between 15-20% year-on-year.  Why then, Bernanke wonders, isn't the US economy growing as a capitalist economy should grow under such conditions?

Perhaps the US is just faking a Capitalism.

Most definitions of Capitalism include reference to private ownership of the means of production which exist on a "for profit" basis- i.e. survival of the fittest.

While worthy of discussion in their own right I'll only note in passing that ownership of the means of production is far from private in its early 20th Century sense and that existing on a "for profit" basis likely implies not existing (as opposed to being bailed out) if losses are excessive, hoping to draw your, and perhaps Mr. Bernanke's, attention to the graph below.

source: BEA

Stripped of econo-jargo, the graph above depicts changes over time of new capital (means of production like factories, tools, etc.) investment compared to annual national output or GDP.    As you can see, such investment has been generally declining for a decade.  We in the US are at a plateau like a weight lifter who won't add extra weight to his work-outs.  A more clever economist than I, Tyler Cowen, describes the US' condition as The Great Stagnation.

For all the official talk of stimulus, there is virtually no capital investment happening in America.  Is it any wonder unemployment remains high?

The " Constant revolutionising of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation," which, Karl Marx argued, "distinguish the bourgeois [Capitalist] epoch from all earlier ones" is not a current feature of American political-economy.

Can you fake a Capitalism?

I think we're doing about as good a job as Meg Ryan did above.  While some might wish "to have what she's having" I prefer the real thing and I suspect most Americans would too.

A few suggestions:

• let's focus on the real economy instead of the monetary quantifications thereof
• let's stop stimulating the economy and start investing in it
• let's stop being financialists and start being capitalists again

As JS Mill wrote: Capital, by persons wholly unused to reflect on the subject, is supposed to be synonymous with money. To expose this misapprehension, would be to repeat what has been said in the introductory chapter. Money is no more synonymous with capital than it is with wealth. Money cannot in itself perform any part of the office of capital, since it can afford no assistance to production. To do this, it must be exchanged for other things; and anything, which is susceptible of being exchanged for other things, is capable of contributing to production in the same degree. 

Paraphrasing Clinton (for Bernanke): It's the capital, stupid!