Market Overview

Death of Capitalism: End of the Game?

I. The Death of Capitalism?

A recent MarketWatch article written by Chris Oliver discussed how a financial author named Richard Duncan believes that capitalism is dead and credit is forming the basis of the contemporary economic system. According to the article, Duncan has said that "this represents a new economic system." Duncan: "The biggest impediment the world faces in overcoming this crisis is the broadly held misconception that we are operating in a capitalist system."

Per Duncan's analysis, credit creation and consumption, "what Duncan calls 'creditism'", has displaced the capitalism of the 19th century -- effectively replacing gold-backed laissez-faire economic activity with a credit-based fiat-currency financial system. In this way, "Duncan believes that true capitalism died in 1914, when nations across Europe abandoned gold-backed currencies."

In light of a credit-based global economy, Duncan said, "I'm recommending making use of this new economic system. Borrow money at the government level at very low interest rates and then invest that money and change our world for the better." In terms of global finance going forward, Duncan believes that "coming changes will debunk commonly held notions about growth in emerging markets." As such, Duncan seems to take a bearish perspective on China -- analogizing China's status to Japan's former status. Duncan: "Japan's economy was a bubble, and today it's no bigger than it was in 1993 if you don't adjust for deflation."

Oliver's article discussed how despite the fact that Duncan's tone is reminiscent of Austrian school economics, "Duncan...sees 'sound money' policy recommendations as a recipe for disaster." As such, Duncan's "policy recommendations are downright Keynesian." Duncan's analysis suggests that the US should "invest in sectors that would give an edge in future technologies that could be commercialized" in order to set the global economy into equilibrium. From the article: "Building a national solar-energy grid that could tap the arid landscapes of Nevada are among Duncan's recommendations." Thus, Duncan's conclusion is that "part of the solution requires governments to spend more -- not less."

Duncan's observations regarding the "death of capitalism" come at a time when the study of economics is at a crossroads. Per economist Paul Krugman's commentary, economists "have not ... delivered" in terms of economists' justifying their existence via models and analysis. Krugman's discussion portends that we are living in a "dark age of macroeconomics". Krugman: "Economists have failed to fulfill their social function." Even further, "there are also many calls for new economic thinking" including the creation of new macroeconomic models in order to explain the global financial crisis and to learn from past crises in anticipation for the future. In terms of the study of economics going forward, Krugman noted, "It seems that we need some kind of sociologist to solve our profession's problems." Does this current dark age of macroeconomics suggest deeper issues with respect to the human journey?

II. The Game of Economics

I have previously discussed issues with the study of economics and the role of economists going forward. In light of our current predicament, now may be a good time for new economic thinking. It may mystify individuals and scholars that in an age where humanity can put a man on the moon and fly around the world faster than the speed of sound, humanity has failed to come to a pragmatic consensus regarding economics. It's as if, though we live in a period of history where heart transplants and cloning is possible, the study of basic economics remains a mystery. Even today, in terms of economics we have the Keynesian school, the neo-classical school, the Austrian school, the Marxist school, et al. At this point in history, given what we know, dissension in terms of economic theory would seem mystifying. We live on a planet with nearly seven billion intelligent, conscious individuals for whom economic activity is a necessity -- and yet, in light of expansive credit, gross government intervention, and a dark age of macroeconomics, are we seeing the best that economists have to offer?

In some ways, Duncan's perspective seems to hearken back to Karl Marx's theories regarding an eventual end to the capitalist system. In Marx's critique of capital, he discussed credit as being an avenue of "fictitious capital" by which capitalists make use of the financial system for profit via stocks and speculation. Effectively, fictitious capital works to extend the capitalist game -- until that point when the pyramid gets flipped over owing to superstructural transition.

For example, the popular boardgame Monopoly once had a "Stock Exchange" add-on that worked to inject more money into the game -- where players could buy and sell shares of stock and use them as collateral, property, etc. In the real world, with the advent of fictitious capital and interest-bearing instruments, credit overtakes the notion of physical money. Marx: "With the development of interest-bearing capital and the credit system, all capital seems to double itself, and sometimes treble itself, by the various modes in which the same capital, or perhaps even the same claim on a debt, appears in different forms in different hands. The greater portion of this 'money-capital' is purely fictitious."

Aside from Monopoly, another game that seems to reflect the capitalist model is a classroom game known as "Starpower". In Starpower, players each draw a number of colored chips from a bag, and each group of chips has a certain point value, e.g. a blue chip may be worth 1 point, a red chip 5 points, a green chip 15 points, a gold chip 25 points. In the course of the game, players can trade chips with other players with the intent of increasing their point count. Players are then relegated to different classes based on their point totals -- and eventually after a few rounds, those with the highest point counts are able to create new rules to the game going forward. After every round of chip-drawing and trading, new point counts are tallied and classes are separated accordingly.

Starpower can develop in different ways, but the gist of Starpower is to demonstrate how the concentration of capital and stratification of wealth leads to class consciousness and exploitation. In Starpower, the wealthy are wealthy owing to fate, not labor or because they deserve wealth. Generally, at the end of the game, those who find themselves at the bottom of the pyramid become apathetic, lethargic, and simply wait for the game to be over. Those very few at the top of the pyramid begin to think of exploitative, oppressive ways of maintaining power while keeping the game going. In some ways, Starpower reflects a harsh, uncomfortable reality regarding the human experience and the course of the human journey.

Whereas games may serve as mere crude representations of global economics, it's interesting to think of contemporary capitalism as being a game like Monopoly. Today, ours is a global game. And like Monopoly, the game ends when all the players are bankrupt save for one winner with all the money and property. Whereas the Stock Exchange add-on could be perceived as prolonging the game by injecting money into the system, the general format of the game remains; in the end, one player will have all the property left and everyone else will be bankrupt. Given the current status of global economics and the acknowledgement that we are all partaking in this global game of capitalism, should we then be surprised to see so many bankrupt? Should we be upset over the outcome in light of the nature of the game?

Even further, if global economics could be likened to a massive game, what is especially precarious is the idea that the game is inherently unfair. Unlike Monopoly, many find themselves playing the global economic game against their will -- unable to leave the table even if they wanted to. If we could compare the global economy to an enlarged Monopoly board with millions upon millions of spaces and billions of players with trillions of dollars, as with an actual game of Monopoly those who get to roll the dice first, i.e. those who are born earlier, obviously have a higher and distinct advantage over those who roll later, or those who are born later. This then leads to the prospect that upon realization of this fact, many of the players (as in the game Starpower) will become apathetic and may refuse to continue playing the game. Thus, in Marxian terms, the flipping-over of the pyramid could be likened to a flipping-over of the board. And as I recall from playing Monopoly with my siblings growing up, when one flips the board over, that is when the game is over.

III. An Approaching Endgame

If the global economy is a massive game akin to an expanded version of Monopoly, the general format of the game and the end result of play remains.

Interestingly enough, going back to my recent commentary on Nick Bostrom's simulation argument, there are several key aspects to our global predicament as humans that seem to portend an approaching terminus of sorts. Overpopulation, climate change, youth unemployment, global economic collapse, water scarcity, nuclear war, take your pick. Even aside from concrete socio-economic issues, there are also substantive issues with respect to faith, trust, hope, and a lack of global leadership.

For instance, I have previously discussed how the fact that we cannot escape from this "game" is quite foreboding. Obviously, were humanity able to leave the game at will, that would add a radical new dimension to our current global plight. In some ways, humanity's being able to leave the planet and establish self-sustaining colonies elsewhere would call into question and compromise many commonly-held beliefs, i.e. the concept of a planetary apocalypse would then have to expand into a galactic apocalypse in order to remain viable (whereas even if the world ended, humanity would remain elsewhere in the universe). Another example of this concept rests in Marx's theory of historical materialism, whereas if humanity had permanent, viable settlements elsewhere, the economic course of human "prehistory" would effectively jump off the timeline. I cannot overemphasize enough the significance of our inability to leave. We are in effect strapped on to this doomsday roller coaster against our will.

Again, going back to Bostrom's simulation argument, there was an interesting news story that came out recently that conveniently did not get very much attention in the media. Apparently, University of Maryland theoretical physicist Dr. Jim Gates, perhaps one of the most intelligent minds on the planet, has discovered strange computer codes concealed in superstring equations. Gates: "What I've come to understand is that there are these incredible pictures that contain all the information of a set of equations that are related to string theory... Buried in [the pictures] are computer codes just like the type that you find in a browser when you go surf the web."

Per Gates' discussion, there would appear to be computer code written into the equations used to describe the cosmos: "computer code, strings of bits of 1s and 0s." Gates: "It not even just is computer code, it's a special kind of computer code that was invested by a scientist named Claude Shannon in the 1940s." The implications of Gates' discoveries are mysterious. Per Gates, this discovered computer code is "not just random 1s and 0s." Some commentators have suggested that Gates' work will lead to clear evidence that we are in fact living in some sort of computer simulation or that humanity in the future will be able to construct universes similar to our own -- leading into a question of "stacking", producing simulations within simulations.

I hope to go into more depth regarding these concepts in the future, but in taking into account the discussion above, our current situation appears to portend an end of sorts. This does not necessarily mean the "end of the world", but this terminus does make sense in light of the fact that the game appears to be winding down, i.e. there appears to be little room for the game to develop further in a useful sense owing to technological advancement and fundamental flaws in human governance. Whereas one could posit that the capitalist superstructure may have two or three booms left in the system owing to technological development and the search for more efficient economy, if we go back to the prospect of the majority of players in the game becoming apathetic, trying to view the development of the global capitalist game in the long-term can be difficult. The problems only compound in considering the past 6,000 years of recorded history -- human society requires a certain measure of faith and trust in order to continue. At a time when faith and trust has declined, one has to wonder what exactly is left for the human journey -- especially with the specters of overpopulation, the depletion of natural resources, and transhumanism.

The difference here is apparent in considering the popularity of the Mayan 2012 prophecy. Far from a sense of relief, one has to wonder if an uneventful Dec. 21, 2012 would pass with a heavy air of global disappointment.

It is as if at a certain point, it makes more sense for the game to end than for it to continue. As with Monopoly or Starpower, once it is clear that self-interest has become moot owing to the course of the game, the interests of the players lead into an emerging consciousness that the game ought to be brought to a close. Ergo, as it is clear that the game is not worth playing for a critical number of players, it makes more sense for the game to end than for it to continue. Players begin to withdraw from the game. What might this look like on a global scale? We don't really know, but we may be seeing signs of what happens when individuals withdraw from reality in MMORPGs -- where one's virtual existence becomes greater and arguably more real than one's actual existence in reality.

In light of Bostrom's and Gates' observations, perhaps this is how the global economic game was meant to develop -- for some mysterious, otherworldly purpose. Whether or not humanity is reaching that point is a matter for further debate. That being said, one cannot help but notice all the symptoms and signs that seem to portend that an endgame of sorts, a terminus, is on the horizon. Will humans choose to step into some sort of dystopian Orwellian world, or will they choose to simply stop playing? The question comes to mind: Where really do we go from here?

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