I woke up this morning thinking, of all things, about politics vs. economic systems.

Buh….this is what happens when you stop drinking coffee.  But I’m going to write it down so 1) I can get it out of my head and 2) I can look it up later for fiction purposes.

In capitalism, money is the major political (power) unit.  But wait!  Capitalism is an economic system!  Except money is used to influence politics, to undercut or influence the votes of both the people and our elected representatives.  Money is power; power is politics.

So here’s what I’m thinking.  Money behaves like gravity.  Money attracts money; money absorbs money; money has satellites.  Money does NOT behave like gravity.  The amount of money in a system is not a constant – you can’t make more mass, but you can make more money.  Money and value (unlike gravity and mass) are not constant.

But money doesn’t behave like water (it doesn’t trickle down).  It attracts satellites.

Okay, first case – look at the U.S. as if it were a closed, purely capitalistic system.  If the government, that is, we do not do anything to affect how money moves in the U.S., companies will do everything they can to succeed and get more money.  Having more money, they have more ability to gather more money.  There are other forces, like unions, hostile takeovers, etc., that could break companies up, but those forces will tend to gather more money as well.  Eventually, all the money will belong to a single entity or a handful of entities who have agreed to act as a single entity in the interest of self-preservation:  a black hole.  My guess is that, in a closed, purely capitalistic system, a few people will have most of the power (and thus, the money), and the rest of the people will be living in a cashless or minimally-cashed world, owing their souls to the company store.

Second case – the U.S. as an open, purely capitalistic system.  I think one of two things will happen.  First, pure capitalism will outcompete other political systems, in which case we’ll end up with the same situation, only it’ll take longer.  Second, another political system or a combination of political systems will outcompete pure capitalism, and capitalism will die out.

Third case – the U.S. as a closed, purely socialistic system.  Socialism is a political system (and an economic one) in which labor is the major political (power) unit.  I acknowledge we have yet to see a case of pure socialism on this planet.  But let’s hypothesize.  Money itself becomes devalued and meaningless.  Some people’s labor becomes more valuable than others, and some kind of accounting system comes into existence – money.  Back to the first case.  Or everyone’s labor stays at a constant value.  Suddenly, if you can’t work, you don’t eat.  Or everyone’s labor stays at a constant value and non-workers are somehow taken care of.  Then nobody has what they need to live, because if every worker’s labor is the same value (x) and if the total labor pool has to support non-workers (at expense of y per worker), then the workers have to live on x-y, or less than x.  But wait!  No system is frictionless; workers must also supply z, the cost of maintaining the system, which, per worker, is z.  So the average worker produces x, from which y and z must be removed.  The average non-worker produces nothing, from which z must be removed anyway.  The average system worker produces x, to which y is removed but z is added.  The system will tend to take over, with people either stopping producing labor entirely or joining the government and adding to beaurocracy but not actually producing anything.  Either way is a kind of heat death, in which everybody ends up with the same amount of practically nothing.

Fourth case – the U.S. as an open, purely socialistic system.  Either pure socialism outcompetes other systems or it doesn’t, if yes, then see the third case; if not, it dies out.

Now, what I think is actually happening is that the U.S. is not purely capitalistic (duh) but that it is certainly not purely socialistic, either.  (Note that nobody has proposed changing labor to the political unit.  Taking money from the rich and giving it to the poor is NOT socialism; you’d have to restate the problem in terms of labor, not dollars.)  Some political (that is, economic) entities have become so big that they are or have been collapsing markets (Microsoft, GM, the financial market, which has become so intertwined that it’s not functioning as a healthy, competing market, but a collection of allies that have agreed not to take each other over, that is, it’s better to screw the investors than each other, and ditto health insurance companies) into monopolies or olipolies (is that the word?).  They are turning the market into a black hole.

Now, working for a large company is pretty choice.  Not only do you make more money, but you get better benefits.  AS LONG AS your company is making money, preferably more money than it made last year, it takes care of you.  You trade your labor for the good life.  My opinion is that the best companies try to approach a reasonable level of socialism for their workers, who trade x, and who use capital to pay for y and z rather than drawing y and z out of x, as much as possible.  Working for the U.S. Government is like that, too, only the government uses taxes for y and z.  Now, the best companies also try to reduce the amount of z to increase profitability, but they tend to keep x at a high amount, because good workers are better than poor ones.  Not all x is equal.  The U.S. Government claims to be trying to reduce z, but, because nobody really competes with the government, lowering y and z isn’t vital.  Y and z, in fact, end up going right back to the U.S. population, so either the government reduces y and z, and money stays with the U.S. people, or the government doesn’t reduce y and z, and money stays with the U.S. people.

So – big companies (and the U.S. Government) get bigger, attracting both more money and better labor, becoming behemoths that kill markets and transforming a capitalistic society into a socialistic one.

Is that bad?  Is it so bad to be taken care of by a company or the government?  Personally, no.  However, on a system level, it sucks.

Either the companies compete or are outcompeted by other companies on the U.S. or world markets.  See the second case.  Without limitation, the U.S. Government will approach something almost socialistic.  See case three.  So it’s a race between a black hole and heat death, if we have a world without limitations.

What we want, for the U.S. as well as the rest of the world, is a churning market (that is, neither defined by monopolies nor worldwide poverty), framed either or both in terms of money (capitalism) and labor (socialism).  In order to maintain a churning market, two things have to happen:  the government must limit large entities, and the people (voters) must limit government.  A paradox.

To further complicate things, a country that limits it corporations and government may not be able to effectively compete against other countries, who don’t.  See China, who has fewer regulations than we do, and who is kicking our butts economically right now.

Personally, I’m of the opinion that what we “should” do is use regulation to break up monopolies and olipolies (again, that word).  Right now, we don’t have the regulatory tools to break up things like the health care, financial, or U.S. automobile industries; they aren’t monopolies, and they still compete, so what can we even do to them to make them stop screwing up the entire country?  How do we do it in such a way that we make the U.S. more competitive, worldwide?

(Also, I think health care insurance is a special case.  Insurance is supposed to be a bet against the risk of something happening; however, everyone has health problems, so health insurance is a bet against having more health problems than you pay in premiums.  Which isn’t much of a bet, as the only way for the health insurance companies to guarantee that is cheat – take bets and then kick people off the books when it looks like they might lose, refuse life-saving treatment because they lose money, etc.  I’d just as soon see the government run it.  I hate cheaters, and I suspect there’s no way to have a non-cheating, capitalistic health insurance system.)

Okay, that’s enough for today.