Capitalism and the Evolution of Humanity

Capitalism and the Evolution of Humanity

As long as capitalism exists, so shall the cycles of boom and bust. Many of those who support capitalism believe that it is inherently an organic process. Of the other known economic systems, they believe that it provides a system that most accurately represents what is seen in nature. They believe that competition creates a market in which “that which is best” is naturally selected. Indeed this is the truth, however, in a market that is out of balance, (one in which consumers are dominated by producers), “that which is best” is often the efficiency of capitalism itself. This could be seen as the flash point of a market, during which the producers are transformed into gigantic consumers. When the market as a whole, experiences a bubble, or flash point, what is happening is a huge shift of wealth at a much higher rate than is normal. This is analogous to a river (capital) that moves from a rate described as the flow of X to a speed that is best described as a coefficient of the average rate of return in that market. When a river that sustains a colony of life on either of its edges begins to move water quicker, it’s like a monsoon season, everything is flooded out. Large trees might survive this, but most of the vegetation and cultures around that river are wiped out.


This happens when the focus of the market is no longer on the micro goals of building better products and services, but completely on the macro goals of consuming currency quicker. Obviously both of these goals are required for a healthy market place, but if either of the two becomes overly dominant in any market, then something is afoot. In the situation whereby the amount of currency flow is too much, as in the analogy of the flood, then what occurs is that the producers end up consuming their most precious resource, the buying ability of the consumer, much faster than it can be replenished. In this example it is like the lake that this river feeds. The flow is so great that the walls surrounding the lake can no longer hold the water. They burst, and all of the currency in the reservoir begins to disappear. In this case, the actual towns around the lake and the river begin to dry up, because the lake eventually disappears and the river without a reservoir becomes a creek. In our current situation we have a bailout, and this bailout is analogous to spraying a fire hose of water on all of these towns in an attempt to replace the water that has now began to disappear. Obviously this won’t work unless a dam is built to retain the water. To extend our analogy, in order to survive these cycles of boom and bust, we need to build a dam. A dam that we can open up to allow a sudden river flood ease of passage without destroying the environment around the lake itself.

This is the only way to moderate the cycles of boom and bust. This would not limit booms, it would only remove their destructive capacity on the lake towns in the form of busts. Booms are very important for markets that are dependent upon the flows of capitalism. The primary participants in the market, the buyers and the sellers of products, are dependent upon it for their individual existence as well as their collective existence. However, there is a much greater human benefit we have received from the bubbles of the past.

If we reflect to the dotcom bubble we will note that the one thing, which still existed after the dotcom bubble, popped was the Internet in a form that didn’t exist prior to the bubble. It was because of the bubble that the Internet became a global marketplace upon which many other more sustainable business models are now based. Even in this recession, cell based business models which incorporate commerce over this medium are thriving.

In the end, the dotcom bubble laid the foundations for the global communications that now saturate our existence. These global individual communication streams are balanced enough between producers and consumers to allow a much more sustainable market. Even as these individual producer/consumer markets that exist within this global communications medium thrive, the older business models which were built around previous modes of communication, such as the newspaper and television, are struggling. Newspapers are the hardest hit, with new ones closing down each day. Of course this coincides with the recession, but what is left after each recession is what the next evolution of society shall be built upon.

When we look to the housing bubble we see a similar situation; a glut of new homes. Overpopulation has been a concern on the minds of many people. However, there is an over abundance of new homes. Now obviously the purchasing power of each individual who participates in the market has diminished, because on the whole we have all stopped buying, except for the trickles that still exist, and the green shoots we are seeing in many areas. But even as we may be experiencing population growth, and over crowding, we are experiencing empty housing development upon empty housing development. There is no scarcity in the housing market when it relates to new homes, nor as it relates to those being foreclosed upon. The values of these have dropped because of this over building. However at the same time, there is now much more room for the population as we expand in these areas. As builders become bankrupt and banks who lent indiscriminately to these builders go under, these homes will eventually be available at a much lower price, and as the waters return and the process of recession reverses, there will be a place for people to move.

As long as capitalism exists, there will be boom and busts. However, as the population who are participants in this market grows, so does the destructive scale of the bubbles. Deregulation is built on the assumption that the more participants in a market, the less each one has to absorb in a recession. However, the more global the marketplace becomes, the more far reaching the effects of a bust.

In the end, humanity evolves through harnessing the energy of capitalism. It is through the power of booms that humanity takes it’s largest steps forward. We must allow for bubbles, but we also have to understand the power of bubbles as they pop. In the end, we need to harness this great power by regulating the flow so that the busts occur in such a fashion as to remove their tendency to annihilate entire sectors of the global economy.



[edit on 22-7-2009 by HunkaHunka]